…environmental economics and the implications of environmental policy

Archive for the ‘revenue recycling’ tag

“We need to do that for our economy,” …add unnecessary costs that is

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The federal Minister of Finance again needs to be commended for his statements that Canada needs some sort of climate policy consistency at the federal and provincial levels (here),

“It’s probably inevitable we have some different approaches now that don’t fit together,” Mr. Flaherty told reporters at a news conference, after a speech to the Vancouver Board of Trade…But he said it will be in Canada’s interest to eventually reconcile the various approaches. “We need to do that for our economy,”

The problem is that Canada does not have leadership on this issue,

Mr. Flaherty did not speak to the question of who would lead this convergence.

But perhaps even more troubling is the shots at Ontario, the praise for BC, and the incongruence between economic policy and climate policy in the federal government’s mind

“It’s not helpful for Ontario to be the jurisdiction in Canada with the highest business taxes and I am going to continue to say to the government of Ontario that, ‘You’re discouraging business investment,’ ” he said, calling those policies “unhealthy” for Ontario’s economy and the Canadian economy as a whole.
He praised B.C. for its move to cut the corporate income tax rate from 12 per cent to 11 en route to 10 per cent by 2011.
“Congratulations to the government of the province of British Columbia for doing that. It will help brand Canada. It will help attract investment to Canada, but the province of Ontario has shown no indication of going in that direction to reduce their business tax.”

The current federal plan provides no mechanism to raise revenue and therefore there is no chance for further drops in federal corporate income tax. Add to this the observation of many that the federal cupboard is bar due to unproductive tax relief such as the GST cut and unchecked federal spending and well, there is no room for the Ministers prized policy – that of further reducing corporate taxes.

So, not only is the current federal plan likely to be high cost, due to its focus on regulatory approaches, subsides and offsets, but there is no opportunity to further reduce unproductive taxes on corporations and personal income. Simply, climate policy is not being integrated with economic policy, a shortcoming that will necessarily lead to higher costs.

Perhaps when the minister asks “ Mirror, mirror on the wall, who has the lowest climate policy cost of all” the minister will be surprised to find that he has the urge to send poison apples to more folks than just Premier McGuinty.

Written by Dave Sawyer

March 6th, 2008 at 1:39 pm

A harmonized carbon price? Please make it so Jim.

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When Jim Flaherty, the Federal Minister of Finance makes very public comments about climate policy, it is important. (see here). All too recently all things climate policy seemed to be the exclusive purview of Environment Canada. While Environment Canada is the logical lead on the file, the lack of visibility of others Ministers in the government on the file has been troubling. Climate policy is truly cross-cutting with important thinking required on industrial policy, international relations, energy and lots lots more. Look to Bali and Canada’s “results” for a good example of when a single department and Minister covers the entire file.

So it is interesting to see the Federal Finance Minister wade into the climate policy realm in a public way. The Minister’s key point is about federal-provincial cooperation:

“Generally speaking, the consensus I would say is that it is desirable in Canada not to have multiple regulators in various areas of the economy,”

This is a good signal since the proliferation of a hodge-podge of carbon policies has to have industry and others doing business in multiple jurisdictions worried and could perhaps lead to higher overall costs (as the minister states in the article).

So while the Department of Finance has likely been beavering away assessing the possible macroeconomic impacts associated with carbon pricing, it is good to see the Finance Minister shake the tree bit. Lets just hope more consultation does not lead to inaction.

Written by Dave Sawyer

January 15th, 2008 at 5:50 am