April 19, 2016 – In Nova Scotia, the prevailing attitude toward carbon pricing lies somewhere between skeptical and outright hostile. So there is a steep hill to climb before we even get to recycling carbon revenue.
A plan to allocate such revenue will in fact have to be a big part of selling Nova Scotians on carbon pricing in the first place. So recycling must be at least as much about politics as about economics.
In this regard, the allocation of revenue must be seen to be both fair to the vulnerable and appropriate to Nova Scotia’s economic circumstances. Public perception will matter crucially, so the recycling plan needs to be transparent and easily communicated.
Based on these objectives and constraints, I would propose a 3-part allocation:
- 25% would be distributed as a targeted cash rebate to the less well-off—for example up to the median income.
- 50% would fund a reduction of income taxes with 85% of that amount allocated to personal tax reduction and 15% to corporate reduction—these proportions mirroring the relative yields of the two taxes currently. The PIT reduction would increase acceptability of carbon pricing and each tax reduction would have positive economic impact, particularly given the high prevailing rates in Nova Scotia.
- Finally, 25% would be allocated to support development and implementation of innovative, carbon-reducing technologies. The symbolism of such specific ear-marking should increase public support for carbon pricing. Moreover, Nova Scotia needs to do more to encourage innovative economic development and the adoption of best practices.
This 25-50-25 allocation could be easily measured and tracked so that government could be held to account. This kind of assurance is needed to generate the trust of a skeptical public.
All told, such an allocation might convince Nova Scotians that pricing carbon is not such a bad idea after all.
ABOUT THE AUTHOR
Peter Nicholson is semi-retired after a career in the public and private sectors during which he was: the inaugural Chief Executive Officer of the Council of Canadian Academies (2006-09), the Deputy Chief of Staff for Policy in the Office of the Prime Minister of Canada (2003-06); Special Advisor to the Secretary-general of the OECD (2002-03); Chief Strategy Officer of BCE Inc., Canada’s largest telecommunications company (1995-2002); Assistant Professor of Computer Science at the University of Minnesota (1969-73). His career has also included senior executive positions in banking and the fisheries industry, as well as in Canada’s federal public service. He holds a BSc and MSc in physics from Dalhousie University and a PhD in operations research from Stanford University. Dr. Nicholson is a Member of the Order of Canada, and has been awarded honorary degrees by five universities in Canada. He currently splits his time between Annapolis Royal, Nova Scotia and Austin, Texas.