Provinces urged to make carbon pricing work fairly

Toronto, April 6, 2016—In a report released today, Canada’s Ecofiscal Commission calls on Canada’s provinces to make wise choices in how they recycle the revenue from carbon pricing.

Provinces are faced with many options and trade-offs; the report shows that, done right, revenue recycling can make the economy and environment work better for all Canadians.

“Carbon pricing is happening in Canada and around the world because it is the most cost-effective way to address climate change,” said Commission Chair Chris Ragan, an associate professor of economics at McGill University and member of the Federal Government’s new Advisory Council on Economic Growth.

“The revenue presents both opportunities and choices—some are better for the environment, others for the economy.”

“The reality is that each province has unique challenges—from helping industry to investing in technology to cutting taxes,” Ragan continued.

“This report shows that, by recycling revenue wisely, governments can ensure our industries stay competitive and that carbon pricing is fair to households.”

The primary objective of carbon pricing is to reduce greenhouse gas emissions. But the price is only half the story. Carbon pricing can generate substantial revenue for provincial governments.

As the price ramps up over time, provincial governments need to choose what to do with the revenue. How this revenue is recycled back into the economy can affect both economic and environmental objectives.

The new report, Choose Wisely: Options and Trade-offs in Recycling Carbon Pricing Revenues, focuses on the costs and benefits of six revenue recycling options:

• Transferring revenue to households
• Reducing existing tax rates
• Investing in emissions-reducing innovation and technology
• Investing in critical public infrastructure
• Reducing government debt
• Providing transitional support to industry

As priorities differ across provinces, revenue-recycling choices will differ across the country.

The Commissioners conclude that both fairness and competitiveness challenges can be addressed with good policy, and therefore need not be an obstacle to implementing carbon pricing policies.

About Canada’s Ecofiscal Commission

Established in November 2014, Canada’s Ecofiscal Commission is a unique effort to advance fiscal policy reform for the benefit of Canada’s economy and environment. The commission comprises a dozen prominent economists from across Canada’s regions and 18 advisors including former political leaders and leaders from the business sector and civil society.

Over its six-year mandate, the commission will publish and promote discussion of research and recommendations grounded in Canada’s regionally diverse economic and policy context.

It will focus on issues most relevant to Canadians and policy-makers including those affecting fresh water, air quality, environmental disasters, greenhouse gas emissions, transportation and road congestion.

The Commission termed these “ecofiscal” policies—a new word to facilitate a new conversation about solutions guided by both economic and environmental objectives. The Commission is funded by several Canadian family foundations and Canadian corporations.

For more information about the Commission and to view its reports visit: www.ecofiscal.ca