-----

Resources



Market News

 June 03, 2006
Canada needs an emissions tax: report

 Toronto, Canada (GLOBE-Net) -- Canada's national climate change policy has been repackaged several times over the past 15 years, but has done little or nothing to reduce greenhouse gas emissions say the authors of a new report released by the C.D. Howe Institute. Among the many recommendations of the report are mandated carbon reductions and taxes on emissions.

The study,Burning Our Money to Warm the Planet --- Canada's Ineffective Efforts to Reduce Greenhouse Gas Emissions, was led by Professor Mark Jaccard of Simon Fraser University.

The government's policy has relied largely on an 'information and subsidy' approach says the report, focusing on providing information of emissions reduction methods to businesses and consumers, and funding the development and application of environmental technologies. Under this framework, policies were renamed -- from the 'Green Plan of 1990 to the 'Action Plan 2000 on Climate Change' - but did not change substantially, with the most recent plan being 'Project Green', a $10 billion initiative designed to meet Canada's Kyoto Protocol commitments.

So far, the plethora of voluntary and information programs have presided over a 24 percent rise in emissions since 1990. The authors forecast that a continuation of this approach would result in a cost of $80 billion over the next 35 years without a corresponding drop in emissions. In fact, the authors say that Canadian emissions would rise by a further 50 percent over that period under the current policies.

While voluntary initiatives for industry or consumers may encourage some to make a decision based on moral arguments or new financial incentives, many will continue to make energy-inefficient choices as long as the free discharge of greenhouse gases is permitted to continue, the report says.

The problem with voluntary programs and subsidies comes from the fact that firms and individuals are still permitted to 'free ride', or continue to emit GHGs without fear of penalty.

Even the proposed 'cap-and-trade' plan which would regulate 'Large Final Emitters' such as the oil and gas, mining, and power generation sectors, would fail to produce cuts in the short-term, and would be less effective if industries grew faster than expected, says the report.

Subsidies such as the Wind Power Production Incentive (WPPI) and Renewable Power Production Incentive (RPPI) will bring some growth in clean energy but much of that would occur naturally and is supported by other policies, concludes the report.

One option the authors put forward in order to effectively reduce emissions is a gradually increasing tax on carbon emissions. A tightening of limits on emissions or an expanded cap-and-trade scheme could have the same result. True financial or legal barriers to emitting GHGs are the only way to mandate change, they say, citing evidence from international policy changes.

The most promising seems to be a carbon dioxide tax, which could be applied with a corresponding decrease in other taxes to result on no net tax shift. Taxes and investment measures would have to be structured in order to shift new capital investment to low emissions options, says the report.

The cap-and-trade system could be improved to include an absolute or gradually tightening cap instead of intensity-related targets. Management of carbon could also be shifted to industries, making emitters responsible for emissions in the same way they must take care of other hazardous materials, the authors say.

Overall, Canada must employ progressive new policies if real emissions reductions are to be achieved, conclude the authors, warming that "without a substantial shift in policy, we will be burning our money to warm the planet."