Ecological Fiscal Reform

The Spring 2007 federal budget in Canada had a new twist: the government implemented a tax on gas-guzzling cars, while giving a rebate to consumers who choose fuel-efficient vehicles.

The David Suzuki Foundation proposed this type of policy to the federal government back in 2005 in a report called Drive Green. We have a similar proposal that would provide an incentive to consumers to purchase energy efficient appliances while avoiding inefficient ones entitled Switch Green.

Policies like these are referred to as Ecological Fiscal Reform (EFR), and they are being used all over the world, but not much in Canada. The concept is simple. EFR involves uses financial incentives to achieve sustainability goals.

One example of EFR is a tax shift. This is accomplished by reducing taxes on products and services that protect the health of Canadians and the environment while increasing taxes on polluting activities. This kind of EFR is being used in Europe with great success, and would help make Canada’s economy cleaner and more environmentally sustainable.

Best of all, these tax shifts are designed to be “revenue neutral” so that citizens don’t have to pay more taxes. EFR ensures that prices in the marketplace better reflect the environmental cost of production.

The Government of Canada is beginning to respond to calls for EFR. According to its own April 2007 survey, 60 per cent of Canadians support a green tax on consumer and industrial products to crack down on pollution.

Right now, Canadian governments subsidize polluting industries such as the oil and gas sector without providing the same level of support for clean ones such as wind power generation. As a result, we have built an economy dependent on polluting fossil fuels.

The result? Canada's environmental perfomance ranks 28th out of 30 countries
But there is good news.

The David Suzuki Foundation is actively identifying how EFR could be used in Canada. By making the polluter pay and reducing taxes on non-polluting or job generating activities, the marketplace makes Canada more environmentally sustainable.