Politics - Federal

What is the Green Shift, Anyway?

By Ryan McGreal
Published September 15, 2008

One of the biggest issues in the October 14 federal election is the Green Shift, the campaign centrepiece of both the Liberal Party and the Green Party (which calls its version the Green Tax Shift).

It is the sharpest break from the Conservative Party's platform and, indeed, represents a significant break from the Liberal Party's own past policies.

The only problem is: not many people know just what the heck it is.

Some of the blame for this must fall on the parties themselves.

On the Liberal Party's Green Shift website, I had to wade through page after page of vague platitudes before finally discovering the Green Shift Handbook (PDF). Even then I had to muddle through ten pages of boilerplate before getting any clear statements of policy.

The Green Party's Gren Tax Shift page is only marginally better, hiding the actual policy in long-winded economic treatises.

Green Tax Shift in a Nutshell

The Green Party would impose a $50 per tonne carbon tax and simultaneously reduce income taxes so the change is revenue neutral.

As the party explains, "The overriding goal of a carbon tax is to send a price signal through the entire economy. It is a straight-forward, efficient way to help get the prices right."

This would include carbon tax rebates for people with low incomes or who live in the rurals and payroll tax cuts for business owners. People who make less than $20,000 a year will pay no income tax.

In addition:

The Green Party's plan would also increase tax incentives for renewable energy production; eliminate subsidies for fossil fuel production and cap overall fossil fuel extraction; fund building retrofits for insulation, heating/cooling and lighting; encourage healthy communities with active transportation (walking, cycling, transit); and phase out coal, oil, gas and nuclear power plants.

Liberal Green Shift Compared

The Liberal Party's Green Shift is broadly similar, albeit more modest. The carbon tax would start at $10 per tonne the first year, rising to $40 per tonne after four years.

As their campaign literature explains, "We will cut taxes on those things we all want more of such as income, investment and innovation, and we will shift those taxes to what we all want less of: pollution, greenhouse gas emissions and waste."

The Liberals would also reduce the federal corporate tax rate to 14 percent by year four, with an additional percent off for small businesses.

Their plan will boost research and development incentives for green innovation and add a fast capital cost depreciation allowance for green technologies.

Why Carbon Tax?

The main premise behind this shift is the pragmatic, conservative idea that people respond to price signals.

With an income tax, the only legitimate way to reduce how much you pay is to sock more money into an RSP or to reduce your income.

With a shift to carbon taxation, if you want to reduce the tax you pay, all you need to do is emit less carbon.

It's clear from many European examples that you can do this without sacrificing your quality of life. (In fact, I'd argue that most of the likely changes will actually improve most people's quality of life.)

The Green Party points out that other countries to shift their tax policy from income to carbon have seen significant improvements in energy efficiency and real reductions in GHG emissions while maintaining healthy, strong, productive economies.

Sweden launched a carbon tax in 1991 (yes, they really are that far ahead of us), followed in the 1990s by Finland, the Netherlands, and Norway.

NDP Cap-and-Trade Plan

The other main proposal for reducing carbon emissions, which the NDP advocates, is to move to a cap-and-trade system, which regulates emissions at the industry level rather than the individual level.

Under cap-and-trade, the total allowable carbon emissions are capped and polluters are allowed to buy and sell emission permits. Companies that emit less carbon can sell their excess permits to companies that emit more.

Over time, the total cap is reduced as more companies move to less carbon-intensive operations.

Like the carbon tax, cap-and-trade is based on price signals, providing an incentive to pollute less. However, the target of the carbon tax is the individual consumer, whereas the target of cap-and-trade is the industrial emitter.

The NDP plan (which, by the way, is at least as hard to figure out as the Liberal and Green plans) focuses mostly on cap-and-trade, promoting "green collar jobs", and increasing funds for transit and building retrofits.

Carbon Tax v. Cap-and-Trade

Cap-and-trade is often seen as more politically palatable, because it doesn't require individual voters to change their behaviour and targets the big industrial polluters, who are the most obvious GHG emitters.

As a result, various cap-and-trade programs are already in operation, and the Kyoto Protocol is based around global cap-and-trade mechanisms.

However, cap-and-trade requires a costly, elaborate system of oversight and regulation, including clear, accurate accounting of industrial emissions, and permit allocation that is strict enough to drive actual reductions.

It requires corporate polluters to report their emissions and government regulators to audit those reports for accuracy and compliance.

Past cap-and-trade programs have been successful. The American Acid Rain Program, a cap-and-trade system for sulfur dioxide and nitrogen oxide in the 1990s, managed to reduce total pollution by a projected 50 percent in 2010.

On the other hand, the European Union Emission Trading Scheme, a carbon cap-and-trade system came under sharp criticism for issuing so many permits that overall carbon production remained virtually unchanged. This has resulted in the regulatory body tightening the caps for phase II of the scheme.

The carbon tax, by contrast, is geared more to drive changes in personal behaviour. Instead of forcing big polluters to change their behaviour, a carbon tax creates an incentive for people to make less polluting choices: to buy a more fuel efficient car, or to carpool, or to move into a neighbourhood with good transit.

It requires less bureaucracy and oversight and is therefore less susceptible to "gaming" than an emissions trading market.

It also tends to be regressive, because it applies equally to everyone whose consumer choices emit carbon, though both the Green and Liberal plans include rebates for low-income earners.

Ryan McGreal, the editor of Raise the Hammer, lives in Hamilton with his family and works as a programmer, writer and consultant. Ryan volunteers with Hamilton Light Rail, a citizen group dedicated to bringing light rail transit to Hamilton. Ryan wrote a city affairs column in Hamilton Magazine, and several of his articles have been published in the Hamilton Spectator. His articles have also been published in The Walrus, HuffPost and Behind the Numbers. He maintains a personal website, has been known to share passing thoughts on Twitter and Facebook, and posts the occasional cat photo on Instagram.

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By peter (anonymous) | Posted September 16, 2008 at 01:50:13

thanks for wading through all that tripe. i've got a slightly better understanding of the 'green shift' now...i think.

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By BE (anonymous) | Posted September 16, 2008 at 09:27:36

Is there any published research on the effectiveness of a carbon tax? Since Sweeden has been doing it for 17 years, there must be some good data there.

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By Capitalist (anonymous) | Posted September 16, 2008 at 12:39:57

The "Green Shift" is nothing but a plan to lower the standard of living of all Canadians. Think that green shift will have any impacts? Consider that China and India are opening a new coal plant every month for the next 15 years! Outside of the left wing nuts in eurpoe and NA nobody gives a sh$t about "climate change".

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By jason (registered) | Posted September 16, 2008 at 20:05:36

so, because people in China and India want to kill themselves breathing coal smoke-filled air, we should too??

Great plan. It sure seemed to me like China was ultra-proud of their environment during the recent Olympics.
It's not like they tried to hide it or cover it up or anything....

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By geoff's two cents (anonymous) | Posted September 17, 2008 at 05:21:29

Thanks for the synopsis, Ryan.

Couldn't have said it better, Jason. I also find the use of the word "plan" confusing. Just whose plan might it be? Perhaps convincing the western world not to breathe smoke-filled air is actually a terrorist plot?

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By Campbell (anonymous) | Posted September 17, 2008 at 16:52:07

I'm not a Green partisan by any stretch. I don't think "market signals" or the sum of individual choices will remotely be enough to save the planet. The state-capitalist system, no matter how efficient, will eventually outgrow the biosphere.

But as a stop-gap measure, I've always thought the Green Party policy of tax-shifting was beyond ideology - a genuine no-brainer. Who doesn't want their income tax lowered?

I feel my income tax is too high. Over the years I've strived to lower my "ecological footprint" by riding a bike primarily, taking responsibility for my waste, growing a bit of food, buying local/organic, etc. I want a break on my tax burden for this because, after all, I'm also reducing my contribution to the cost of essential public services (road construction and maintenance, waste mgmt., wastewater mgt., health care for respiratory illness and the effects of pesticides, etc. etc. etc.)

For people who hold to the standard Left critique that the effect of tax shifting is regressive, I suggest that they read "Energy and Equity" by Ivan Illich (available free online).

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By Patricia (registered) | Posted September 20, 2008 at 19:07:19

Thank you for this. I was quite unclear as to what it was all about. This seems to me to be a great way to reduce carbon emissions. Problem is that the vast majority of Canadians are so ill informed about carbon footprinting that they think this is a tax grab.

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