Policies with Possibilities: moving towards a green economy

As recently as last April, Environment Minister John Baird stated that implementing the reforms required by the Kyoto Protocol would "manufacture a recession" and "would have a devastating effect on the Canadian economy." Canadian governments have consecutively acted as though serious environmental reforms to really cut emissions would destroy the economy. But the Canadian Council of Chief Executives disagrees. So do a host of European countries and countless organizations that are reaping the benefits of environmental stewardship.

Some Canadians have argued that environmental regulations will restrict industrial work and reduce business revenue and global competitiveness, taking a severe toll on the economy. Successive Canadian governments have succumbed to this argument, and have been wary to take action on climate change, even in the face of clear environmental shifts and increasing incidence of natural disasters.

As a result, government policies have been limited to emission targets like intensity targets that do not seriously address emissions problems.  But the claim that strict environmental policy will result in certain economic harm has been turned on its head. In fact, a recent report by the National Round Table on the Environment and the Economy (NRTEE) reveals the contrary: if we don’t immediately implement environmental policy change, the sustainability of our economy will be threatened.

These immediate responses do not have to place severe restrictions on production and economic growth. Rather, recent research shows that we can implement reforms that mutually benefit the economy and the environment, involving different production and more sustainable growth.

Widespread Support

Interestingly, much vocal support for economic and environmental reforms has come from the business community, from chief economists to chief executives. In October 2007, the Canadian Council of Chief Executives released a report highlighting the need for urgent environmental action, but also asserting that "climate change and sustainable development [are] major economic opportunities."

Significant support for these reforms is also coming from outside the business community, including various environmental groups. Amy Taylor, director of Ecological Fiscal Reform at the Pembina Institute, has demonstrated that shifting the economy to focus on environmental sustainability will be beneficial for both the environment and the economy, not only in the long term but in the short term as well.

The most popular proposed changes are called Ecological Fiscal Reforms (EFRs). According to the NRTEE, EFRs are strategies that use government taxation and spending to create incentives that support sustainable development. Taylor says that EFRs are about "making prices reflect true costs – including the costs of emissions, waste and destruction of the ecosystem." At the same time that costs are internalized, incentives are provided to reduce these costs and their negative effects on the environment.

There are many EFRs that could be implemented. One EFR, already legislated in Quebec, is a carbon tax. This tax requires individuals and businesses to pay for the carbon they produce, whether it be at an industrial worksite or by driving to work.

An even simpler EFR, one in place across Canada, is the deposit refund system for bottles. Individuals pay a deposit when purchasing a bottle, and if the bottle is returned to a recycling depot, the deposit is given back. In most cases, no real revenue is generated, but there is a strong incentive for individuals to recycle.

The revenue generated from EFRs can be used in several beneficial ways, including reducing other taxes, funding research, or as rebates and subsidies. EFRs can also stimulate economic growth and environmental sustainability. They can encourage individuals to produce less waste. They can lead toward innovations in new industry and technology as we become less carbon-dependent. In short, economic and environmental benefits abound.

Lagging Behind

While Canada is slowly realizing the benefits of EFRs, Taylor points out that European countries are miles ahead. "They realized the economic benefits early on," Taylor states. She cites the example of Sweden, where revenue generated from a nitrous oxide emissions tax is used to fund rebates to energy producers in proportion to their energy production. This provides incentives for producers to reduce their emissions: the fewer emissions they produce, the less tax they will pay. Energy plants that have been part of the program since 1992 have reduced their emissions by approximately 37%.

Any EFR must also take into account those who may not be able to afford more taxes or more efficient but more expensive environmentally-friendly products. In Europe, several countries provide tax exemptions for people with low incomes, with some governments going even further and retrofitting affordable housing to make it more efficient.

Some countries have ‘recycled’ the revenue from their environmental taxes, using an eco-friendly concept to apply to the economy. Revenue from taxes is specifically designated for education and innovation, or is returned as rebates to citizens making sustainable choices.

The European example shows that the current Canadian trend towards emissions targets is simply not good enough – Taylor argues we need a comprehensive package approach, with both regulations and fiscal policies, "and it’s time for the Canadian federal government to revisit the possibility of a carbon tax."

Godo Stoyke of Carbon Busters, an Edmonton-based organization that helps schools and businesses reduce their carbon output, agrees. The current emissions targets are "completely insufficient," he states, emphasizing the need for immediate economic reforms.

Hopeful Future

Yet there is reason to have hope. Interest in EFRs and in other policies is increasing. Stoyke points to his own organization, saying that "there has been a big change in interest over the past 6-12 months" – he’s now getting phone calls from businesses in New York and London. And not only has interest gone up, he says, but "support for these initiatives is going across political boundaries, which is really great."

Evidence of this growing support can be found across the country. All new provincial buildings in Alberta must meet certain ‘green’ requirements. In BC, purchases of non-motorized two-wheel bikes are exempt from the social service tax, and the government is considering implementing a carbon tax. Ontario provides a sales tax rebate to any person who installs a solar energy system in their home.

As environmental stewards, we are called to care for creation. Public justice also calls us to be responsible citizens, both while making sustainable choices and wise economic decisions. As our sense of urgency and awareness increases, and as we move forward by learning from our European neighbours and developing our own innovations, it is evident that economic interests can be in line with environmental reforms.

There are many creative and original reforms available to us. As stewards of creation, we have the opportunity to encourage our leaders to care for our world in the best way possible, all the while envisioning new ways of living for a sustainable future.

The Catalyst, autumn 2007, Volume 30 / Number 4