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.

Harper vs Dion With No Plan in Sight

With a federal election in the offing let’s put all the rhetoric and political spin about greenhouse gasses aside for a moment and do a reality check. Let’s try to put this issue into perspective for once.

We've all heard the vague numbers coming out of Ottawa and being thrown around like confetti on the wind. “1990 levels”, “2008 levels”, “reduction percentage by 2050”, but what does it all mean, how do the numbers really break down and is there a real solution?

In a nutshell, the Kyoto Protocol, which was abandoned by the Harper government after being ignored by his predecessor, called for Canada to reduce emissions to 6% below 1990 levels by 2012. It may only be 2008 but that ship has already sailed.

In 1990 Canada had emissions of 569 metric tonnes. A reduction of 6% means Canada, within the next 4 years, would need to reach a level of just under 535 metric tonnes. Instead of reducing to meet those targets, by 2005, Canada was producing in excess of 747 metric tonnes, an increase of about 24% above 1990 and 30% above its Kyoto obligations. That number is still rising.

It’s numbers like these that prove just how ineffectual Canada’s federal government, no matter the stripe, has been when it comes to addressing this global concern.

Instead of truly tackling the problem, as emissions climb, Ottawa’s power brokers and politicians have been scrambling to find ways to use the situation as a means of :

A: meeting their political objective of winning votes in larger centers;
B: lining the pockets of their cronies in big business;
C: filling government coffers; and
D: redistributing wealth from Canada’s fringes to its ever hungry middle.

The best solution Stephen Harper has come up with to date is a watered down version of a cap and trade system. The Harper system would set targets on industry and then charge them a set amount if they exceed those targets. They would also be able to buy and sell those targets with other companies much in the same way as stocks are traded on the stock exchange today.

Can’t you just smell the money trading hands now boys and girls?

Can’t you just feel the wealth growing in brokerage houses across the Country (or at least parts of it) while the skies grow ever greyer and chewier?

What about Stephan Dion? He’s had some time waiting in the wings. Surely he must have a plan. After all it was Dion who helped broker the Kyoto Protocol while serving as Environment Minister.

Enter the Liberal Green Shift.

Dion claims his Green Shift would be a revenue neutral tax. In other words the federal government would not profit from it (the truth of that remains to be seen) but instead would offer tax breaks and fund programs for Joe Taxpayer that would offset “much” of the cost.

According to Dion, by simply cutting back on our use of fossil fuels we can reap the benefits of this new windfall. However if we choose to squander our hard earned money on evil emission producing activities, such as heating our homes in winter, then we will lose any benefit we might have gained and possibly more.

Ah if only the world were just that simple…

First of all, doesn’t the fact that some of the tax collected will be used to fund things such as university tuitions, mass transit or other programs strike anyone as a little odd? Aren’t those programs exactly the sorts of things government tax revenues are used for anyway? Doesn’t that mean the new carbon tax wouldn’t be revenue neutral but simply another form of tax?

Secondly, what the plan fails to take into account, or more likely ignores, is that everyone, in addition to paying the added taxes, will see the cost of goods go up. This is especially true for anyone not living near a major manufacturing area such as Ontario, Quebec or the U.S. border. Those people will see the price of everything they consume rise dramatically as already high shipping costs increase and those costs are passed along to consumers in more remote areas.

The Green plan also glosses over the realities of people in rural areas who do not have the luxury of switching to mass transit to get to work or do their shopping. It forgets about places like the island of Newfoundland and the remote areas of Labrador, areas that have to import most goods by ship or truck. These areas and others like them will see massive increases passed along to consumers in areas that are already economically depressed and suffering from higher than average unemployment.

The benefits of getting a few tax breaks will not be as easily seen by rural Canadians as it will to someone in the say greater Toronto, Montreal or Ottawa area where mass transit is available and goods are more easily transported. Then again, that’s the plan isn’t it?

Here’s a novel idea for both parties to consider. Instead of simply moving wealth around under the guise of protecting the environment and pandering to densely populated areas for votes, why not spend some time actually coming up with real solutions to a real problem?

I’ll give you one free of charge if you want it.

I’m no expert so this idea may be as useless as anything the brain trust in Ottawa has delivered so far but at least I’m willing to toss it out there. I’ll leave it to greater minds (or lesser ones) than my own to figure out if it’s worth the virtual paper it’s written on.

The chart below shows Canada’s emissions by Province in 1990 and in 2005 (the most recent year I could find). Clearly the biggest polluters are Alberta, Ontario and Quebec, in that order. In fact, not only are they the biggest polluters but they, with the exception of Quebec, have also seen their emissions rise sharply, rather than fall, by a staggering amount since 1990.

Here’s a question that comes to mind: Why should the people of all the provinces and territories be tarred with the same brush as the ones that have allowed such big environmental offenders to prosper inside their borders?

Consider Newfoundland and Labrador for example. As the chart indicates, its emissions have remained virtually unchanged over the period in question. In 1990 Newfoundland and Labrador’s emissions accounted for only about 2% of Canada’s total emissions, a number within reason when you consider that it also had between 1.6% and 2% of Canada’s population during the same time period.

Instead of simply setting up a mechanism for the big boys to profit by trading away our future, instead of making everyone pay equally for what is clearly a bigger problem in certain parts of the Country and instead of simply shifting hard earned cash into Central Canada by way of tax breaks, why not think outside the box.

What about a plan that incorporates some parts of each party's plan with a Provincial element. Sort of a Cap and Tax Provincial Targeting Plan (catchy name huh?)

Here goes...

When it comes to most forms of federal funding or federal programs in general: equalization, health care transfers, etc. calculations are generally done on a per capita basis.

In addition, politicians are always happy to remind us that there is a value to be placed on emissions, so why aren’t per capita calculations good enough when it comes to those?

Taking Canada’s overall emissions and dividing them up by each provincial or territorial share (on a per capita basis) one can quickly see where the problems are. All Ottawa has to do is simply charge each provincial government (not individuals or business) their fair share of “carbon costs” that exceed their provincial limit.

Under this plan provincial governments that have allowed industry to develop unchecked and without concern for the environment, would be left to make things right by collecting additional taxes, fining industrial polluters or paying Ottawa out of their own general revenues for that development. In other words they would pay their fair share for the “cost of carbon” they produce.

Remember that carbon emissions are the result of industrial development, manufacturing and population density (autos, homes, etc.). The reason why some provinces have such high carbon emissions is because they have more industry and more people. In other words they are benefiting from the industries and people that produce them.

High emitting provinces are gaining by having high employment rates, more corporate taxes, a large personal income tax base to draw from and all of this is thanks to the industries that have setup there and the people who work in them. Shouldn’t the provinces benefiting the most by destroying the atmosphere shoulder most of the burden?

Canada is not a one size fits all Country and not all provinces are producing the same amount of emissions. By making the provincial government responsible for paying its share of the cost it it puts the individual provinces in control of their own carbon destiny while ensuring that national targets are addressed. This approach would allow each region to look at its own unique options for how to address those federal costs in a way that works best for their constituents and the business interests in their area rather than placing a blanket tax on every individual in the Country.

Yes, the cost of goods would still go higher but at least those in more economically depressed areas and those who are not responsible for the lions share of the problem would not be forced to pay additional taxes as well. Provinces above their share of the target would pay. Those below it would not. It’s that simple.

To follow through on this, the newly generated federal revenues could then be used to lower Canada’s carbon footprint Nationwide through investment in new technologies, funding projects like CO 2 sequestration, the east/west power grid, the Lower Churchill hydro development, wind power, mass transit and R&D.

In the end this type of approach might go a lot further toward solving the problem than either of the existing federal plans and it would allow some flexibility in various regions that could have positive economic impacts.

Not only would those who benefit most (the worst emitters and those who condone their actions), pay the cost but federal investments in renewable power and green technology would allow some parts of the Country to almost immediately reduce their footprint to below their provincial target.

One place that comes to mind is Newfoundland and Labrador with projects like the Lower Churchill. By opening up the east/west grid and developing the Lower Churchill hydro project Newfoundland and Labrador could shut down its major oil fired generating plant and immediately fall below its target. It could then sell some of its excess power to other jurisdictions like Nova Scotia or Ontario and in doing so help them reduce their carbon footprint in a major way.

In addition, instead of trading away the benefit of this carbon under capacity through some sort of corporate trading system, as touted by Stephen Harper, provinces that move below their targets would then have the advantage of being able to attract new industry and jobs by virtue of offering less expensive tax regimes than overly developed areas with high carbon taxes.

I’m no expert but it would seem that such a plan might actually result a cleaner environment, lower unemployment in economically depressed areas, create a more geographically dispersed economy and allow the federal government to commit to a stable and shared power infrastructure and R&D program across Canada.

I can’t promise you this sort of thing would actually work, but at least it’s an idea and one that is offered without any sort of political gain as a motive. Unfortunately the fact that it isn’t politically motivated is why I can almost guarantee you that no federal politician will ever consider it.

Dion to "Shift Green" Among Provinces.

A recent respondent to one of my articles spoke of their concerns with Stephane Dion's new carbon tax or “Green Shift”. In their words:

“…supposedly it's revenue neutral…The logic is that by "deciding" to use less fuel you can keep more of your tax money and spend it on the things that matter to you.”

“People in places like cold Labrador… who suffer through long cold winters can't "decide" to not heat their homes. It may have some benefit in BC…where winter temperatures are much higher but not here and not up north.”

“What about those living in rural areas who drive 20 or 30 kilometers to get to work. No mass transit for them. Great for Toronto or Montreal though (with mass transit).”

“What about Newfoundland and Labrador where, thanks to the fact that there is very little manufacturing, nearly everything consumed has to be trucked, shipped or flown in? Don't tell me the added cost of fuel won't cause skyrocketing prices.”

“This is a crock.”

Well said, but I’ll go further than calling it a “crock” and call it exactly what it is. A fraud.

The Liberals are absolutely right when they call it a “green shift” because ultimately it will shift a lot of green (dollars) out of places like Newfoundland and Labrador and into Ontario and Quebec.

Recently former Liberal MP, cabinet minister and interim leader, Bill Graham, posed a series of questions to a panel of experts reviewing the plan that cuts to the heart of the issue: “What does revenue-neutral mean? It sounds nice when you say it, but it will create winners and losers. Who’s going to win, who’s going to lose and who’s going to pay?”

Good point Bill. There is no such thing as “revenue-neutral”.

Perhaps from Ottawa’s perspective it makes sense in that government can return every dollar of carbon tax to the public in the form of other tax breaks, but that doesn’t mean that those dollars will flow back to the individuals it came from.

In essence the Liberal “green shift” is a system of taxes that will, much like the much hated national energy plan before it, shift a large amount of money from places like Newfoundland and Labrador to the wallets of voters in Ontario and Quebec.

In order to produce oil, for example, natural gas is often used in the extraction process. This will increase the cost of oil production leading to lower royalties for Newfoundland and Labrador and raise second thoughts among oil executives considering future projects that might be “gas intensive”.

The Holyrood generating plant, which currently supplies a huge amount of the island’s power, burns heavy oil by the millions of barrels a year. Meaning an increase in carbon tax will increase the electrical bills of every householder and business.

In Labrador a large number of communities depend on diesel generated power. Neither they, nor anyone using oil to heat their homes, can afford to simply cut back on their usage to any appreciable degree.

Granted the Liberal plan would provide tax cuts to offset carbon taxes but will it be enough to cover the cost for individuals who really don't have a lot of choices that might allow them to go greener and where do you think most of those tax breaks will have the biggest effect?

It’s not hard to figure out. Simple math will tell you. Surely the manufacturing sector in Central Canada will pay more carbon tax as well, but with more 60% of Canada’s population residing in Ontario and Quebec (many of which have access to cheap Churchill Falls power and mass transit systems) most of the tax breaks will be enjoyed there as well.

As far as Stephen Harper is concerned Newfoundland and Labrador may as well be a far off land that is of no concern to him. The Liberal Party of Canada, if elected, will try to push forward with their latest “Green Ontario/Quebec tax shift”. Either way you slice it this is not a good day for places like Newfoundland and Labrador on the federal scene.

Perhaps, as some have said before, it’s time to consider a “shift” of our own in Newfoundland and Labrador. Perhaps what we need is a political shift.

With a string of minority governments almost guaranteed in Ottawa these days, electing a locally focused “Newfoundland and Labrador” party may well be the way to go. Seven representatives in Ottawa fighting for Newfoundland and Labrador, rather than toeing the line for Canadian parties, may be the only hope this place has to block harmful legislation introduced by either of the mainstream parties.

It's certainly a better option than doing nothing and waiting for the axe to fall.