Ecofiscal = smarter economics for a healthier environment

The Canadian debate about how to change economic performance to reduce environmental damage has often been chaotic and sometimes downright nasty.

Many experts have proposed changes in economic policies to cut environmental impacts. They have often been ignored by governments that find the ideas too difficult to deal with, or attacked by politicians who refuse to accept ideas contrary to their ideology.

So, despite some important changes in business behaviour, many of our environmental problems are worsening. For example, Canada’s total greenhouse gases emissions are forecast to keep rising, despite federal government promises to reduce them.

That’s why it’s refreshing to see a high-powered and highly credible group calling for governments at all levels to use market-based approaches to discourage pollution and to encourage innovation.

Canada’s Ecofiscal Commission www.ecofiscal.ca says we need to put a price on pollution. We can use the revenue to generate economic benefits, by reducing corporate and personal income taxes, returning money to low-income households, or investing in technology or critical infrastructure.

The relatively new commission says there are many examples of other countries using ecofiscal policies to deal with water conservation, air pollution, traffic congestion and carbon emissions. These policies lead to innovation and greater business competitiveness.

The Ecofiscal Commission is chaired by McGill University economist Chris Ragan, who has worked at the Bank of Canada and the federal finance department. The very diverse advisory board includes such people as former Quebec premier Jean Charest, former Liberal prime minister Paul Martin, and the Reform Party’s founding leader Preston Manning. It includes Steve Williams, chief executive at Canada’s largest oil company, Suncor Energy Inc., Peter Robinson, head of one of the country’s major environmental organizations, the David Suzuki Foundation, and Sheila Watt-Cloutier, past chair of the Inuit Circumpolar Council.

Their core idea is not new. Economists have long recommended taxing “bads” such as pollution, while reducing taxes on “goods” such as investments and savings. What is new is that such a prominent group of experts are uniting behind the idea. Their credibility will make it harder for governments to ignore their advice.

They have a perfect homegrown example. Since 2008, British Columbia has had a carbon tax on fossil fuels, and used the revenue to reduce personal and business taxes. Since then per capita consumption of those fuels has dropped in the province, while continuing to rise in the rest of Canada. British Columbia’s economic growth slightly outperformed the rest of the country.