Carbon tax could pay off for Canada

The David Suzuki Foundation said the country could generate at least Cdn$50 billion in annual revenue from a carbon pricing system.

Canada could pull in big bucks from a carbon pricing system, according to a report released today by the country’s leading environmental activist.

The report from the David Suzuki Foundation says a carbon tax or cap and trade system could generate revenue of at least Cdn$50 billion per year by 2020.

The bold claim comes less than a week after British Columbia became the second province in the country to introduce a carbon tax system, setting a price of Cdn$10 per tonne, going up to Cdn$30 per tonne in five years.

Quebec started collecting a carbon tax on hydrocarbons last year.

Today’s report asserts that the Cdn$50 billion figure is the low-end, with a phased-in carbon price potentially generating as much as Cdn$100 billion for the country.

“If a relatively modest portion of the substantial revenue generated is earmarked towards green projects, the level of greenhouse reductions you get is even increased further, by approximately 10 percent,” Pierre Sadik, senior policy adviser at the foundation, told

He said the money could be used for renewable energy.

“Reducing the cost for wind power producers, solar power producers, geothermal producers, just reducing the cost per kilowatt hour a little bit.”

Last month, Norwegian consulting group Point Carbon said the cash value of the global carbon trading market in 2007 was $60 billion, up about 80 percent from 2006’s value of $33 billion (see Global carbon trading value almost doubles in 2007).

In Canada, Sadik said a portion of the potential revenues could be used to encourage people to make their homes more efficient.

He said could be used for the “installation of a high-efficiency furnace, or the addition of insulation, or triple-glaze thermal windows, that kind of thing.”

The non-profit foundation, started in 1990 by scientist, author and broadcaster David Suzuki, said the money raised could even be used to reduce personal income taxes.

Sadik said the foundation, as part of Canada’s Green Budget Coalition, presented the government with a proposal for a carbon pricing system about eight months ago, but it isn’t likely to be included in the federal budget, which is scheduled to be introduced in the House of Commons tomorrow.

“Unfortunately, all of the indications we’ve received from the government is that they will not be putting a price on carbon, either through a carbon tax or a meaningful cap and trade system,” he said.

The government is planning to introduce a trading system that involves intensity-based emissions, but Sadik said that approach would not cap emissions.

“The government is asking emitters to reduce the volume of emissions per unit of production, but, overall, if production continues to rise, emissions can of course continue to rise, even though production may become somewhat more carbon efficient,” he said.

The foundation’s study, called Pricing Carbon: Saving Green, was prepared by economist Mark Jaccard’s M.K. Jaccard and Associates in Vancouver and consultancy EnviroEconomics in Ottawa.

According to the foundation, several countries, including Germany, Norway, the U.K. and Sweden, have placed a price on carbon and that greenhouse gas emissions have subsequently decreased.

Sweden enacted a carbon tax system in 1991, setting a price of $100 per ton, which has since gone up to $150.

Sweden’s Ministry of Environment has estimated that the carbon tax has cut emissions by an additional 20 percent, as opposed to relying solely on regulations.

The David Suzuki Foundation said Canada’s economy could continue to grow rapidly even with the introduction of a carbon price of over Cdn$100 per ton.

“We’re trying to discourage activities that are problematic and harmful to society, such as the operation of carbon intensive facilities and the purchase of carbon intensive products,” said Sadik.

“Just like society’s done with cigarettes in the past when you want to discourage something.”

But the foundation also wants to encourage the use of sustainable products and services, not just discourage the release of greenhouse gases, and it recommends using a portion of the revenue to offset income taxes.

According to the report, if the entire revenue generated by a carbon price were used to offset income taxes, Canadians would experience a 50 percent average reduction in the income tax they pay.

While most of the savings would be offset by an increase in the cost of carbon intensive products, the report said Canadians would be free to buy what they wanted to maximize the income tax savings and to minimize the impact of the carbon price on their wallets.

The group said the same policy could be applied to corporate income taxes.

Sadik said the country needs to implement a system soon.

“The federal government is finding itself falling, falling, further and further behind,” he said.

With Quebec introducing a modest carbon tax last year, and British Columbia’s tax starting in July, Sadik said it’s possible that at least one more province could introduce a carbon price later this year, meaning three provinces with three different carbon tax systems.

He said that could lead to investors shopping around to see which areas have the lowest price on carbon.

“I don’t think anyone wants that. I don’t think anyone wants that kind of situation where we’ll have province pitted against province in Canada.”

(By David Ehrlich)

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