Drive Green: One step to a cleaner economy

Drive Green: Company Car Tax Shift is a groundbreaking policy proposal to reduce vehicle greenhouse gas emissions and air pollution.

Modeled on a successful program introduced in the United Kingdom, Drive Green is designed to:

• Reduce CO2 emmissions by one megatonne per year
• Reduce the pollutants that cause smog
• Reduce fuel costs for businesses and employees
• Avoid job loss in Canadian automobile assembly plants
• Retain current income tax revenue

Drive Green encourages employees to drive more fuel efficient company cars by shifting some of the tax burden from efficient cars to cars that pollute more.

Download Report--(PDF)

Under current tax rules, employees who receive company cars pay additional income tax based on the cost of the vehicle. Under the Drive Green proposal, employees who drive lower emission company cars would enjoy a tax reduction, while those who choose less efficient cars would be taxed at an increased rate.

This kind of policy, known as ecological fiscal reform (EFR), helps improve economic efficiency by correcting the prices of goods and services. EFR includes costs born by society as a whole, such as increased health care costs due to air pollution.

Currently, Canada lags behind most other industrialized countries in the adoption of EFR measures, including economic instruments. Canada’s slow adoption of economic instruments places a burden on the economy and the environment.

According to the OECD, the annual rate of productivity and GDP growth of many OECD countries surpasses Canada’s.1 And 27 of 30 OECD countries now rank ahead of Canada on environmental performance.

In response to this policy gap, the 2005 federal budget outlined a rationale for the use of economic instruments to pursue environmental and economic goals simultaneously.
Stakeholders were invited to submit proposals for economic instruments to the federal government.

Drive Green is a response to this call for submissions. Prepared by MK Jaccard and Associates for the David Suzuki Foundation, this report projects economic and environmental impacts over the course of the next 15 years.

It is the first in a series of policy proposals from the David Suzuki Foundation designed to help Canada achieve sustainability within a generation. The second report of the series, Switch Green, is detailed Ecological Fiscal Reform policy proposal designed to promote energy efficient appliances.