A Revenue Neutral Carbon Fee is the Best Option for Ontario

The province of Ontario is poised to introduce a long-awaited carbon pricing plan, some seven years after the four-party Western Climate Initiative (WCI) agreement was signed in 2008 with British Columbia, Quebec and California. Ontario is the outlier of this group being the only WCI member that has put off taking action on pricing carbon.

Ontario has yet to decide on its preferred carbon pricing option – a carbon tax, a cap-and-trade scheme or the revenue neutral carbon fee and dividend.

Revenue Neutral Carbon Fee and Dividend – How it Works

The revenue neutral Carbon Fee and Dividend is a price on carbon that functions as follows:

• An incremental fee is placed on carbon-based fuels at the source (well, mine or port of entry).
• This fee increases steadily each year so that clean energy is cheaper than fossil fuels within a decade.
• All of the money collected would be returned to Canadians on an equitable basis. Costs are passed on to consumers thereby reducing the carbon consumed.
• Under this plan 66% percent of Canadian households would break even or receive more in their dividend cheque than they would pay for the increased cost of energy, thereby protecting the poor and middle class.
• A predictably increasing carbon price will send a clear market signal which will unleash entrepreneurs and investors in the new clean-energy economy.

Revenue Neutral Carbon Fee and Dividend – Best for Lower and Middle Income

The Canadian Centre for Policy Alternatives, using income tax data from British Columbia, has determined that two thirds of Canadians emit average or less than average greenhouse gas emissions.

This is important because with a revenue neutral carbon fee and dividend, every household receives the same amount of money in its dividend cheque, regardless emissions or income.

Middle and lower income Canadians would receive more in their dividend cheque than what they paid in carbon fees. Thus, with revenue neutral carbon fee and dividend, two thirds of households will come out even or ahead, especially those with lower incomes.

Another interesting statistic from the 2011 Centre for Policy Alternatives research was that the top 1% of households emitted three times more greenhouse gases than average and almost 6 times more than households in the bottom 10%.

Citizens’ Climate Lobby advocates for the Revenue Neutral Carbon Fee and Dividend

The revenue neutral Carbon Fee and Dividend is a progressive carbon levy that will reward carbon-conscious consumers and protect people living on lower incomes as we transition away from a high carbon economy. It is the most politically workable carbon pricing mechanism.

Carbon Tax

British Columbia  implemented a revenue-neutral carbon tax on July 1, 2008. The use of a straightforward tax or carbon fee is fast becoming the preferred option for pricing carbon. There are numerous advantages: it takes no time to set up; it requires no additional bureaucracy; it’s easy to understand and simple to monitor.

Sweden arguably has the best carbon pricing scheme on the planet:

Sweden imposed a carbon tax in 1990 that is now 100 Euros per ton, which is a pretty hefty price. Since 1990, Sweden has reduced emissions while GDP has risen 36%, demonstrating that a substantial fee is effective in reducing emissions without harming the economy. (Citizens’ Climate Lobby)

Cap-and-Trade

Quebec and California implemented a  joint cap-and-trade program which sets limits on how much carbon companies are allowed to emit. Companies that surpass their limit must then buy permits from companies that burn less than their allotment. However the world-wide experience with the cap-and-trade mechanism has been less than desirable. Citizens’ Climate Lobby highlights some of the shortcomings of the cap-and-trade:

The European Union, which has currently implemented a cap-and-trade system, is a case in point.  This system places a price on permits so low that it has no impact on emissions. Undoubtedly, the biggest problem is offsets, which are easy to manipulate and extremely difficult to measure and verify. Trying to make compliance inexpensive via offsets is the antithesis of what needs to happen.

There is increasing pressure by Quebec Premier, Philippe Couillard, for Premier Wynne and Ontario to join the California-Quebec cap and trade market. But it would be a mistake for Ontario to do so. Only two of the WCI original signatories (11 US states, Quebec, Ontario) have joined the cap and trade pricing scheme, undoubtedly deterred by the administrative pitfalls of running such a scheme. Most jurisdictions are now opting for less onerous carbon pricing mechanisms.

Once Ontario implements its carbon pricing plan, more than 80 percent of Canada’s economy will be subject to a price on carbon. This is no small feat considering the fact that Canada’s Harper government has been a sorry laggard at international climate talks meant to reduce global carbon emissions.

Pricing carbon is moving inexorably across the world. Around 40 national and 20 sub-national jurisdictions have implemented or are planning emissions trading or taxes – representing 22% of global emissions. (Sustainable Business)

Sign this letter to Premier Wynne for an EFFECTIVE and EQUITABLE carbon pricing system for Ontario.

Sign the letter to your MPP urging support for carbon pricing in Ontario.
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Rolly Montpellier is the Founder and Managing Editor of BoomerWarrior.Org. He’s a Climate Reality leader, a blogger and an Climate Activist. Rolly has been published in several online publications – Climate Change Guide, World Daily, Examiner, The Canadian, 350Ottawa, ClimateMama, MyEarth360, GreenDivas, The Elephant, Countercurrents, Georgian Bay News.

Some of Rolly’s articles have also appeared in newspapers such as The Hill Times and the Kingston Whig. You can follow him on Facebook, Twitter and Linkedin.