Ocean Mist

Issues and trends shaping our environment, health and economy

19 Jul 2014

Taxing pollution

Posted by Michael Keating

If we are to green the economy, can we use pricing to encourage people to reduce pollution? Why not tax pollution?

Recently, the prime ministers of Canada and Australia attacked the idea of carbon taxes and emissions trading as ways of reducing greenhouse gas emissions, saying these hurt the economy.

In an opinion piece in the Globe and Mail, Munir Sheikh, Canada’s former chief statistician, did a study that found no evidence for these claims. Mr. Sheikh looked at the performance of several industrialized countries that rely on environmental taxes.

He writes that countries with high environmental taxes scored better than Canada on environmental, as well as social and economic indicators. While Canada has a high GDP per capita, it has the second worst labour productivity growth. On income inequality Canada and the United States rank at the bottom of the list, with Denmark and Norway at the top.

The former head of Statistics Canada says his study shows that putting taxes on pollution will not destroy the economy and “that environmental goals are achievable at the same time as economic and social goals.”

He adds his voice to those of such organizations as the World Bank, International Monetary Fund and the Organization for Economic Co-operation and Development, which have called on countries to use carbon pricing to reduce emissions and therefore the impacts of a changing climate.

Within Canada, there is some carbon taxation. A British Columbia carbon tax began in 2008, offset by reductions in other taxes. According to the BC government: “The carbon tax puts a price on carbon emissions to encourage individuals, businesses, industry and others to use less fuel and reduce their greenhouse gas emissions.” Since 2008, fuel use for transportation in BC has dropped, and the provincial economy has continued to grow. Quebec also has a carbon tax, but it does not have as much impact.

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