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SMART

PRACTICAL
CANADIAN OPTIONS FOR
GREATER ECONOMIC AND
ENVIRONMENTAL PROSPERITY
CANADA’S
ECOFISCAL
COMMISSION

EC•O•FIS•CAL POLICY Ecofiscal policies offer real incentives for WHO WE ARE
investment in innovative technologies so that
ekōˈfiskəl/ adj. we can continue benefiting economically from A group of independent, policy-minded Canadian economists working
our natural wealth while also providing better
An ecofiscal policy corrects market price together to align Canada’s economic and environmental aspirations.
signals to encourage the economic activities protection to the environment. The revenue
we do want (job creation, investment, and generated from ecofiscal policies can create We believe this is both possible and critical for our country’s continuing
innovation) while reducing those we don’t further economic benefits; for example, by prosperity. Our Advisory Board comprises prominent Canadian leaders
want (greenhouse gas emissions and the reducing income and payroll taxes or investing
from business, the environment, and across the political spectrum.
pollution of of our land, air, and water). in new technologies or critical infrastructure.

We represent different regions, philosophies, and perspectives from


across the country. But on this we agree: ecofiscal solutions are
essential to Canada’s future.

OUR VISION OUR MISSION


A thriving economy underpinned by clean To identify and promote practical fiscal
air, land, and water for the benefit of all solutions for Canada that spark the
Canadians, now and in the future. innovation required for increased economic
and environmental prosperity.
PUTTING 5 REASONS
PRACTICAL OPTIONS CANADA NEEDS
ON THE TABLE ECOFISCAL SOLUTIONS
A letter from the chair

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T
Chris Ragan, chair, Canada’s Ecofiscal Commission Canada’s natural wealth is fundamental to our prosperity.
Our natural wealth is a source of Canadian pride and is critical to our economy. $228 billion
Jobs in fishing, forestry, agriculture, and tourism depend directly on healthy The health costs of air pollution
he existing national discussion surrounding Canada’s resulting from illness and
ecosystems. Access to clean water is vital to our communities and businesses. Our
economy and environment assumes a fork in the road health and quality of life are tied to the quality of the air we breathe.
premature deaths.

ahead. One path leads to good jobs and profitable

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businesses; the other to a clean environment and
$760 million
We can do better.
sustainable natural resources. No one really wants to Canada’s current fiscal system holds back innovation and productivity
choose between those futures, for themselves or their children. while inadvertently promoting the pollution of our land, air, and water. That The amount that income and business
tax cuts exceeded pollution-pricing
Like a growing number of economists, I don’t believe we have to. environmental damage has a cost, to our economies and to our lives. It doesn’t
revenue under B.C.’s carbon policy
have to be this way. The right policies will provide an incentive to invest in
More to the point, I don’t believe we can. from 2008 to 2013.
innovative and new technologies while lowering the taxes that stunt growth.
Our economy and environment are inextricably linked. It’s not a design, implement, and analyze policies for governments across

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question of which one we need more. But rather, what it will take to the country. They represent no particular party or ideology. Their This is the smartest way to get serious results.
secure both. There are policy options available that can achieve this. commitment is to examine the available evidence and to follow it to Environmental policies don’t have to be expensive to work. But the ones we’re $800 million
But how do we get those options on the table? This is the challenge its rational conclusion.
currently using the most—subsidies and heavy-handed regulations—can be costly The estimated amount the United
that brought me here: to this group of people, to our shared mission, The Commission’s Advisory Board includes some of the most States saved annually by using
to governments and the broader economy, and they’re often ineffective. In
and to the messages you’ll read in the pages that follow. respected leaders from across the Canadian political spectrum. pollution pricing instead of regulations
contrast, ecofiscal policies allow market innovation to drive the lowest-cost,
We should not forget that markets are remarkable institutions Diverse in their experience and perspectives, these individuals to reduce acid rain.
highest-impact solutions.
and that well-designed public policy can make them work even have disagreed on many things. But they agree on this: a new set of

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better. Good economic and environmental policies harness the choices is critical to Canada’s future. That’s the opportunity ecofiscal
power of markets to drive solutions that are both impactful and
cost-effective.
policies provide, and that’s what has brought all of us together.
We’re sitting down at the table to examine the evidence and
This is a significant opportunity.
Canada currently lags behind many of our international trading partners when $816 billion
We have yet to really apply this principle in Canada. But a to have the pragmatic discussion warranted by concerns for our it comes to innovation and environmental performance. But we don’t have to. The estimated annual value of global
growing body of evidence suggests this approach deserves our national prosperity. I’m inviting you to pull up a chair and give us clean-tech markets by 2015. Of the
Introducing ecofiscal policies now will put Canada and our industries on the path to
serious consideration. your views. 65 publicly traded companies on the
compete and succeed in a 21st-century economy. Cleantech Index, only 1 is Canadian.
Experience shows that fiscal tools can be used to significantly Let’s talk about the Canadian jobs, technologies, and industries

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reduce greenhouse gas emissions, pollution, and waste, while we need for an innovative and prosperous economy in the 21st
at the same time stimulating innovation and economic growth.
We’re calling these “ecofiscal policies”—a new term to facilitate a
century. Let’s talk about how we can best create that economy and
still pass Canada’s natural wealth—rather than an ecological debt—
This is both our responsibility and our legacy.
It is neither fair nor responsible to leave our children and grandchildren with debt—
$87 billion
new conversation about market-based solutions rooted in both on to our children and grandchildren. economic or ecological. We built our prosperity on Canada’s clean air, land, and The additional costs in retrofits and
premature retirement of assets if policy
economic and ecological objectives. This is the great policy opportunity of our generation. Let’s seize water. If we make the right choices now, the next generation will have the same
to significantly address Canada’s
The individuals who have gathered to form this Commission it together. opportunity. Today’s smart policies will shape that legacy. greenhouse gas emissions is delayed
are some of the most policy-savvy economic experts in Canada. until 2020.
With hundreds of years of combined experience, they have helped
WHAT DO PRACTICAL
ECOFISCAL SOLUTIONS
LOOK LIKE?

“I joined the Commission because


Tackling water Addressing traffic Reducing Cutting landfill our future prosperity depends on
scarcity in congestion in greenhouse gas waste in the our ability to grow in the context
Singapore London emissions in United Kingdom
British Columbia of a healthy environment. We
Fresh water supply is a major Traffic congestion is a plight Landfill waste contributes to
challenge in Singapore. With of big urban centres. When greenhouse gas emissions, air
need smarter fiscal policies to
In 2008, as part of its ambitious
demand slated to double by everyone pays for road plan to reduce greenhouse gas pollution, and water and soil get there.”
2060, the country needed a infrastructure with general emissions, British Columbia contamination. The UK has
solution to conserve more and
waste less. The government
taxes, there’s little incentive to
carpool or find other modes
instituted a carbon tax that instituted a number of ecofiscal
policies to reduce the amount
Preston Manning
applied to major fossil fuels. By
introduced a water-pricing of transportation. London, law, revenue from the tax must of residential and industrial Advisory Board member and former
system, aligning the costs of England, tackled this problem be offset with equivalent cuts to waste sent to landfills over
using water with the costs in one of its busiest areas with a the past two decades. This
leader of the official Opposition
personal and business income
of treating and providing it. road use charge. Cars entering taxes. As of 2013, fuel use in includes taxing each tonne
Recognizing that this could the high-traffic zone at peak B.C. had declined dramatically, of landfill waste and using a
place an unfair burden on hours are charged a flat daily whereas it had risen slightly in cap-and-trade system, giving
some, the government also fee. The revenue finances the rest of Canada. local waste-disposal authorities
introduced a tax rebate to offset investments in public transit flexibility while guaranteeing
costs for lower-income families. alternatives. Between 2008 and overall waste-reduction targets.
2013, fuel use in B.C.
Over 11 years, Singapore Congestion pricing in dropped by 16%, while Putting a price on solid
achieved a 9% reduction London helped reduce it increased by 3% in waste in the UK helped
in water consumption traffic in a high-congestion the rest of Canada. reduce commercial
without hurting middle- area by as much as 36% and industrial landfill
and low-income families. in 10 years. waste by more than 40%
in five years.

For more information, examples, and references, check out our full report online: ecofiscal.ca
REAL CHOICES,
REAL EFFORT
Getting the right ecofiscal policies in place for Canada will take a concerted effort. It
will require decision-makers to come together and grapple with challenging issues and
sometimes vastly different perspectives. And it will require clear and honest discussions
within civil society. But we have confronted tough policy challenges before in Canada
when it mattered most: instituting public health care, opening markets up to freer trade,
fighting government budget deficits. We can do it again.

THE BIG ISSUES WE MUST ADDRESS


HOW TO MODERNIZE OUR FISCAL SYSTEM “Smart policy means using revenue from pollution fees to reduce HOW TO KICK-START INNOVATION “We need to be thinking about how to stay competitive not just in
WITHOUT RAISING TAXES taxes in a way that encourages job creation and gives money back The right policies will help increase Canada’s rate of five or 10 years, but also in 20 and 50 years. The Commission is
Smart policies that price pollution and environmental to families. Our aim is to show Canadians across the country the focusing on solutions that will make Canadian industries more
innovation, sparking homegrown technologies and
economic and environmental benefits of this approach.” competitive in a rapidly changing global economy.”
damage need not increase the total tax burden new efficiencies that drive environmental results and
on Canadians or increase the overall scale of Jean Charest give our industries a competitive edge. Steve Williams
government. Advisory Board member and former premier of Quebec Advisory Board member and president & CEO, Suncor Energy

WHEN TO BEGIN (HINT: THE ANSWER IS NOW) “Canadian competitiveness concerns require making smart
HOW TO BUILD ON PROVINCIAL AND “This isn’t about robbing Peter to pay Paul; it must not be. It’s
MUNICIPAL LEADERSHIP about showing governments that sensible policy tools can reduce The world’s wealthy nations, including the United ecofiscal decisions, not delaying them.”

Provinces, territories, and municipalities have the pollution and greenhouse gas emissions while helping the States, are already taking bold steps to align their Paul Martin
legal jurisdiction to make significant environmental economy—and also be consistent with their provincial priorities.” economic and environmental goals. We can’t ignore Advisory Board member and former prime minister of Canada

impacts, and they’re already taking the lead. Smart Jim Dinning the relationship with our closest trading partner,
policy changes will build on that momentum across Advisory Board member and former treasurer of Alberta but we can act now and know we’re in the good
the country and do so in a way that need not involve company of the world’s most economically
the transfer of wealth between provinces. competitive countries.

HOW TO REDUCE THE BURDEN ON “If we do it right, these ecofiscal policies will protect the most
LOW-INCOME FAMILIES vulnerable Canadians. This is about being smart in our policy
choices—but it’s also about being fair.”
The costs of energy, fuel, and water can weigh
heavily on the budgets of lower-income families. Michael Harcourt
Smart policies will take that reality seriously and not Advisory Board member and former premier of B.C.
increase the burden on people who can’t afford it.
THE PEOPLE BEHIND CANADA’S PULL UP A CHAIR.
ECOFISCAL COMMISSION JOIN THE CONVERSATION.
Let’s talk about the jobs, technologies, and industries Canada needs for a prosperous 21st-century
COMMISSIONERS Mel Cappe Glen Hodgson economy. Let’s talk about how we can improve our competitive landscape as well as the quality of
University of Toronto, School of Public Senior vice president & chief economist, our air, land, and water. And let’s talk about the policies it will take to get us there. It’s possible, it’s
Chris Ragan Policy and Governance; former president Conference Board of Canada
Chair, Canada’s Ecofiscal Commission pragmatic, and it’s one of the greatest opportunities of our generation.
IRPP; former clerk of the Privy Council
McGill University, Department of Paul Lanoie
Economics; former Clifford Clark Visiting Bev Dahlby HEC Montréal, Department of Applied
University of Calgary, The School of Public Economics
Find out more and share your views.
Economist, Finance Canada; former special
adviser to the governor, Bank of Canada Policy; former member of the Federal
Richard Lipsey
Commission on Business Taxation
Elizabeth Beale Professor emeritus, Simon Fraser University,
President and CEO, Atlantic Provinces Don Drummond Department of Economics
Economic Council Queens University, School of Policy
Nancy Olewiler
Studies; former senior vice president &
Paul Boothe Simon Fraser University, School of Public
chief economist, TD Bank; former associate
Western University, Richard Ivey School Policy; former member of the Federal
deputy minister, Finance Canada
of Business; former deputy minister, Commission on Business Taxation
Environment Canada; former deputy Stewart Elgie
France St. Hilaire
minister of finance, Saskatchewan University of Ottawa, Institute for the
Vice president of research, Institute for
Environment; chair, sustainable prosperity
Research on Public Policy

ADVISORY BOARD Michael Harcourt Bob Rae


Former premier of B.C.; Senior partner, OKT - Olthuis Kleer
Elyse Allan former mayor of Vancouver Townshend LLP; former premier of Ontario
President and CEO, GE Canada
Vice President, GE Bruce Lourie Peter Robinson CANADA’S ECOFISCAL COMMISSION GRATEFULLY ACKNOWLEDGES THE SUPPORT OF:
President, Ivey Foundation CEO, David Suzuki Foundation
Dominic Barton
Global managing director, McKinsey & Janice MacKinnon Sheila Watt-Cloutier
Company Professor, University of Saskatchewan; Past chair, Inuit Circumpolar Council;
former minister of finance, Saskatchewan environmental, cultural, and human rights
Jean Charest advocate
Partner, McCarthy Tetrault; former premier Preston Manning
of Quebec President and CEO, Manning Centre; former Lorne Trottier
leader of the official Opposition, Canada Co-founder, Matrox Electronic Systems Ltd.
Karen Clarke-Whistler
Chief Environment Officer, TD Bank Group Paul Martin Annette Verschuren
Former prime minister of Canada Chair and CEO of NRStor Inc.
Jim Dinning
Chair of Western Financial Group; former Jack Mintz Steve Williams Fondation familiale

treasurer of Alberta Director and Palmer Chair, School of Public President & CEO, Suncor Energy
Policy, University of Calgary
Peter Gilgan
dation familial
Founder and CEO, Mattamy Homes Fon e
Trottier
Fam
ily Foundation
For full biographies of our Commissioners and Advisory Board members, visit ecofiscal.ca
POSSIBLE

Canada’s Ecofiscal Commission


c/o Department of Economics
McGill University
855 Sherbrooke Street West
Montreal, QC H3A 2T7

ecofiscal.ca