We can have our cake and eat it too, said Chris Ragan, Canadian economist and chair of Canada’s Ecofiscal Commission.
Speaking at CIGI as part of the Signature Lecture Series, Ragan discussed a radically practical approach to advancing the climate debate in Canada, which included exploring the Ecofiscal Commission’s mandate and its most recent report, The Way Forward: A Practical Approach to Reducing Canada’s Greenhouse Gas Emissions.
What brings the Commission — 12 policy-experienced economists and a renowned advisory board — together is the shared conviction that Canada can do better as an economy and a country in terms of economic and environmental performance. These two things work hand in hand — the obstacle is the belief that they don’t, Ragan explained.
While Canada should work toward improving its environmental and resource performance — in terms of input versus output — the country must also improve its innovation performance in order to sustain its richness. That is, what drives GDP per capita over the long haul is productivity growth driven by innovation.
We have fiscal structures — governments of all levels are collecting and spending revenue in a variety of ways — that are designed to influence behaviour. Some incentives are designed with crass political objectives; some have been institutionalized and endured over the years because they work, while others have been removed. The problem, Ragan explained, is that as our fiscal systems have evolved over the years we have been taxing the things we want more of (income, profits, employment — the fruits of our innovation) and hardly taxing the things we think are bad. There is a fiscal opportunity and the solution is finding the right incentives.
Ragan explained that the Ecofiscal Commission will be looking at pricing pollution (i.e. road congestion, water and landfill use etc.) and opportunities for recycling revenue (i.e. tax breaks and investments in clean technology etc.), noting that there is an innovation incentive for companies through this approach. Regulation — command and control policy — can be quite effective (with little government costs), but actually pose the risk of higher costs for firms in reducing emissions — and does little to incentivise better performance beyond the established target, Ragan said.
Ragan noted that while every province has adopted an emissions reduction target for 2020, eight out of 10 will miss them by a significant amount. Citing the case of Alberta, he said that the longer we wait the higher the costs become. If Alberta isn’t pricing carbon and the rest of the world is, it will get bumped out of the market and will miss out on the innovation incentives to make its product cleaner.
Discussing The Way Forward, Ragan highlighted the four key recommendations for Canadian provinces: all should put a price on carbon; the provinces’ policies should gradually increase and ramp up over time; policies should be designed for broad coverage; and provinces’ policies should be customized but plan for eventual coordination at the national level.