Layman's Blueprint for a Truly Green Economy

Far too often I'm accused of only discussing the problems that face my little corner of the world rather than looking for solutions. With that in mind I decided to take some time (granted it was only a couple of hours) to consider a "Manufactured Right Here" solution to what many people around the world believe is the biggest concern of our times. Global warming.

Tackling such a major issue is a tall order and since I'm not scientist, politician, economist or even an environmentalist the concept I've come up with may be totally out to lunch. Never the less here it is. A layman's plan for carbon management.

Feel free to poke holes in it, tear it up and spit it back out. Don't hesitate to tell me how naive I am to think something this simple might really work. I'm fine with that, in fact your comments are welcome.

At least I can honestly say I thought about the issue and maybe, if just for a moment, I can silence those who believe I spend far to little time thinking about solutions. After all, with the schedule I have 2 hours is a major committment.

Enjoy.

Cap and Tax Jurisdictional Plan

Background

When considering Canada’s most highly discussed greenhouse gas reduction plans, “Cap and Trade” and the “Green Shift”, three questions immediately come to mind:

Why should corporations be encouraged to profit through the trading of emission credits which are essentially the equivalent of cleaner air? (Cap and Trade)

Why should corporations be permitted to meet their environmental obligations by simply purchasing “clean air” credits rather than actually reducing destructive emissions? (Cap and Trade)

Why should every person in Canada be expected to pay higher taxes regardless of whether or not they live in a jurisdiction that allows excessive levels of greenhouse gas emissions to exist? (Green Shift)

Consider the case of a province like Newfoundland and Labrador, where emissions have remained virtually unchanged for nearly 2 decades.

In 1990 (the target setting year for Kyoto) Newfoundland and Labrador’s emissions accounted for about 2% of Canada’s total output, a number within reason when you consider that it also accounted for between 1.6% and 2% of Canada’s population during the same period.

Other Canadian jurisdictions have a similar story to tell while some have seen their emissions grow by a staggering amount.With these realities in mind important questions need to be answered and a real solution implemented to address a growing environmental problem.

Perhaps the best solution is an approach that incorporates components of the “cap and trade” and “green shift” options with the inclusion of a jurisdictional or provincial component that empowers distinct regions while addressing national concerns.

The Cap and Tax Jurisdictional Plan is based on four fundamental principles:

1) Most federal funding initiatives and programs: equalization, health care transfers, etc. are managed and delivered on a per capita basis across Canada.

2) Political representatives are, quite rightly, quick to remind us that there is a real dollar value or cost associated with carbon emissions.

3) Every person in the Country, as a natural part of their existence, should have an equal right to emit a set amount of carbon per year.

4) No individual should have the right to infringe upon another’s rights through an over production of carbon that would jeopardize the environment in which we all live.

A Cap and Tax Jurisdictional Plan takes into account all four of these basic principles by placing a per capita cost on the value of greenhouse gas emissions and targeting those emissions based on the principle of equity.

How it works

Calculating Canada’s overall emissions and dividing the result into provincial or territorial shares, on a per capita basis, one can quickly see where the biggest problems exist and easily identify precisely how much of the excess emissions (those beyond the Kyoto targets) each jurisdiction is responsible for.

Emissions are already tracked in this way by the federal government today.

By setting a cost per ton on CO2 emissions, knowing each jurisdictional output and population, the federal government can charge each provincial or territorial government, not individuals or business, for a fair share of the “carbon costs” that region produces in excess of per capita limits.

(Eg: Newfoundland and Labrador, with 1.7% of Canada’s population, would be permitted to produce 1.7% of Canada’s targeted emissions. The province would be held responsible for paying the cost of additional emissions produced beyond that target.)Jurisdictions allowing unchecked industrial development without concern for the environment can then be held responsible for the cost of their excess emissions. Under the plan jurisdictions would be obligated to pay the cost of excess emissions into a federal “green renewal fund”.

Precisely how jurisdictions meet their emission expense obligations should be left to the individual jurisdictions to decide. This will allow them to determine their own approach to correcting or paying the cost for the emission problems in their region, either by collecting additional taxes, charging industrial polluters, using general revenues or implementing a unique “made right here” solution that best fits their unique situation.

Ensuring fairness and equity for all

Under a Cap and Tax Jurisdictional Plan each region pays its fair share of the “cost of carbon” rather than forcing everyone to pay equally. This is the fairest and most equitable solution. Emissions are not produced equally across the Country, nor are the direct benefits that stem from those emissions enjoyed equally.Carbon emissions are primarily the result of manufacturing output, industrial development and population density (autos, homes, etc.). The reason some jurisdictions have higher emissions than others is because they have more industry and more people producing those emissions.

This is not a bad thing, in fact the opposite is true, but by accepting the premise that there is a carbon cost connected with the emissions produced, through economic growth and its resulting prosperity, it must also be recognized that those who benefit most from those emissions should be responsible for the associated costs.

Environmental impacts aside, higher emitting regions benefit greatly from the carbon emissions they release. These benefits include lower unemployment rates, a wider corporate tax base, access to resource royalties and a larger personal or corporate income tax base on which to draw. These levels of these benefits that exist within a jurisdiction are a direct result of the industries that operate there and the people who work in those industries.

Is it fair to expect people living in less developed regions (with lower emission output) to pay the same “carbon costs” as those who enjoy the additional benefits available in more developed (higher emission) areas?

Under a Cap and Tax Jurisdictional Plan the areas that benefit the most will be expected to pay their fair share for the economic benefits they enjoy.

The benefits of a jurisdictional approach are clear

Canada is not a “one size fits all” Country and as such a “one size fits all” solution is not the answer.

Not all jurisdictions produce the same levels of emissions and not all jurisdictions have the same economic capacity or growth agenda.

Placing the burden of responsibility directly on provincial and territorial governments, rather than on all taxpayers, provides an incentive for jurisdictions to find creative ways of reducing emissions. It also puts those jurisdictions in direct control of their own carbon destiny while ensuring national and international concerns are addressed.

A Cap and Tax Jurisdictional Plan allows each jurisdiction to tailor a unique solution to their carbon emissions and related costs. This ensures that the solution is one that will work best for their constituents and local industries. It does not place a blanket tax on every individual or business in the Country and it does not make the assumption that the federal government knows what is best for each unique region.

As with any plan that puts a dollar value on emissions there will be a resulting increase in the cost of goods and services. This is unavoidable however most Canadians are willing to shoulder those costs as long as they are fair and reasonable and as long as they recognize that it will truly make a difference to their environmental outlook.

Additional costs are a reality under either a “cap and trade” or “green shift” plan just as they are a reality under a Cap and Tax Jurisdictional Plan. The difference is that under this plan individuals and businesses in more economically depressed jurisdictions, those that are not responsible for the lion’s share of emissions, are not expected to pay higher additional taxes without regard for their role in the production of those emissions.

The plan also ensures that when a region is in compliance with their targets they are positioned to recognize additional economic benefits.

Under this plan the federal government can charge the provincial and territorial governments directly for excess emissions. This allows the process of collection to remain streamlined and cost effective so more of the revenues can go directly into a fund that can be used to help reduce emissions on a national level.

The same level of simplicity would not be possible with the collection of taxes from over 30 million individuals on a variety of products and services or in taxing/fining individual corporations for their emissions. Under those approaches the bureaucratic costs alone would seriously erode the value of any revenues collected.

With a direct provincial/territorial approach the options exist to either collect emission taxes from the 13 jurisdictional governments on an annual basis or simply deduct the value of excess emissions from existing federal transfer payments and route those revenues into the new federal “green renewal fund”.

This newly created “green renewal fund” should be dedicated to the lowering of Canada’s overall carbon footprint.

This objective can be accomplished through investments in green technology solutions, providing funding for projects such as CO 2 sequestration, the east/west power grid, clean energy development, wind and solar projects, mass transit initiatives and investment in R&D opportunities.

This approach will drastically reduce greenhouse gas emissions nationally while being fair and equitable to all taxpayers and providing each jurisdiction with the flexibility and empowerment they need to manage their unique situation.

A green economy provides limitless opportunities.

A Cap and Tax Jurisdictional Plan provides an opportunity for jurisdictions to take advantage of new and positive economic opportunities that would otherwise not exist.Not only would those who enjoy the economic benefits inherent from the emission of greenhouse gases be required to pay the cost of those emissions but it is also true that new opportunities will become available for those that meet or fall below their emission targets.

Federal investment in green technologies and projects across Canada would allow jurisdictions already close to meeting their targets to almost immediately reduce their carbon footprint below the limit. It can help others to work toward meeting their goals.Once again let’s use the province of Newfoundland and Labrador as an example.

With the completion of a project like the Lower Churchill hydro development and a means to get that power to market (the east/west power grid) Newfoundland and Labrador would be capable of shutting down its major oil fired generating plant and immediately falling below its per capita Kyoto target, even based on 1990 numbers.

Once Newfoundland and Labrador has met its power needs and ensured its future capacity it could then sell any excess power generated to other jurisdictions, such as Nova Scotia or Ontario, and in doing so help them reduce their carbon footprint dramatically.This is just one example of how a Cap and Tax Jurisdictional Plan and its “green renewal fund” can benefit everyone.

While a Cap and Tax Jurisdictional Plan calls for a cap on emissions and a tax on excess output it does not directly tax individuals or allow for the trading away of carbon credits. Instead it allows each region to determine how to best handle carbon emissions and related costs and it ensures that any under-capacity in output directly benefits the people of the region by allowing them to leverage their emission shortfall in attracting new industrial and commercial growth.

Jurisdictions that meet or fall below their targets will benefit from the ability to more easily attract new industry and employment. This can be accomplished by offering less expensive carbon regimes than those to be found in already overly developed areas with higher carbon costs. This in turn would allow companies setting up shop in low carbon areas to produce their products or services at less cost than they would find in a higher carbon region.

The ability to attract new industry to underdeveloped regions would improve the economic outlook those regions and encourage higher emitting jurisdictions to further reduce their own emissions and related costs to better align their emission limits and growth potential.

A Cap and Tax Jurisdictional Plan would create a cleaner environment, fairer distribution of emission costs, a streamlined tax collection program, lower unemployment in underdeveloped regions, a more geographically dispersed economy for the benefit of all Canadians, a well funded environmental development fund and make Canada a leader in the green economy.