Recycling Carbon Tax Revenues

One key feature of Dion’s carbon tax proposal – among others – is that revenues are recycled back almost exclusively to households to maintain living standards, especially at the lower income end, while still preserving incentives to save on energy consumption. That’s reasonable as far as it goes. But what about the public sector and public consumption? What is the offset to increased heating and power costs in schools, hospitals, universities and colleges, government buildings etc etc.? Perhaps a direct offset would be preferable to more or less inevitable second round tax increases?


  • When a somewhat progressive income tax is shifted to a regressive consumption tax, and the package is slated to be revenue neutral, whatever the promises to redistribute to compensate low income, the reality is that the Liberal Green Shift puts more money through the cuts into the hands of those who consume the most. Consumption drives environmental destruction of all kinds, not just GHG emissions. Therefore the Green Shift is not green because the people who benefit most from the tax cuts consume more, killing the effect of the consumption tax.
    The CCPA study shows the top decile accounts for the environmental problems. Or to quote Lars Osberg once again, the census data confirms that the bottom 80 percent of income earners met their Kyoto targets. The top 20 percent account for the increase in GHG.
    So could someone explain how income tax cuts which benefit proportionately people the more income they have, become part of a green shift, when we know they lead to more environmental destruction by the very group that accounts for most of it?

  • “So could someone explain how income tax cuts which benefit proportionately people the more income they have, become part of a green shift, when we know they lead to more environmental destruction by the very group that accounts for most of it?”

    Check the numbers. With the various low-income credits a family of 4 with income of $40,000 gets over $2000, while the same family with $80,000 income gets under $1300. If you factored in average carbon footprint (which increases with income), the shift to lower income would become even more noticeable. It is industry which is footing the majority of the bill and a lot of those costs will be passed on to consumers, so the return is heavily skewed to the lower end.

    What I have asked several times on NDP sites and directly to the NDP, and never received an answer to, is how the NDP plan takes care of the lower income families. Besides retrofits and such, how will these families pay their increased bills under a cap and trade? Any carbon pricing is regressive, so how does the NDP handle this? With cap and trade, there is considerable uncertainty in cost to consumers, so I imagine you need to use various models to estimate this. One would like not to underestimate how those with the least income will fare.

    As to schools and hospitals, the Green Shift has allocated $1billion over 4 years for non-profit organizations, including governments, schools, hospitals, etc. There is also the infrastructure program which can cut energy consumption in the future.

  • Andrew Jackson

    Good points. But re public consumption, is $1 B out of $15 Billion of revenues proportional to the level of public vs private consumption in terms of spending on heat and power? $1 B would also seem small relative to the cost of major public sector retrofit/energy conversion programs. Therefore there would have to be either public sector cuts or tax increases.

    I agree that the NDP plan should include low income offsets to cover increased living costs at the low end, and Dion’s plan seems better on that score.

  • Andrew, I agree $1B seems small. However the $1B appears to be simply cash for extra costs, whereas the infrastructure and retrofits/conversions are separate programs. Infrastructure was announced previously and is supposed to come from budget surplusses (not sure how reliable this will be in the future). The incentives for retrofits/conversions is not spelled out at all, as far as I know.

  • Catherine suppose increased consumption at the upper end of the income scale is the main source of environmental damage, as the recent CCPA deciles report suggests. Then should there not be an amendment to the Green Shift suggesting the introduction of a series of new tax brackets, kicking in after the existing top bracket, to tax back the over consumption? And why the obsession with revenue neutral if not to protect the Liberal party from criticism from the rich and powerful, the very people who have to change their practices if the the Green Shift is to work.

  • Phillip Huggan

    These types of investments are the ones that pay for themselves within 4-5 years via reduced heating/cooling costs. You’d figure the G-8 could at least agree on this, but nope, Canada and the USA have decided that since we’re not in a comparitive advantage position to win this race to stomp out climate change, we shouldn’t play at all.
    Dion has mused about building improvements. My high-school didn’t allow parkas to be wron because of weapons concerns. But on Monday morning it was so cold they often let the rule slide. Presumably the building needed some level of government to fund insulation.
    The DoE in the USA has minor incentives for building upgrades. A 10% tax break for window upgrades, capped at $200. Hopefully these figures will be increased dramatically under Obama’s administration. Ideally public sevants like traffic police would be early adaptors of the Zenn car. Zenn has openly mused about a plant expansion after recent suggestions the cars will be made legal on Canadian roads. Five years behind where they’d be now if Transport Canada wasn’t so incompetant. I’d think the federal government owes them a contract or two now that their global competitors have caught up.

  • Canada is number one place to live if you do not wish to concern yourself with global warming as we receive a 8.8. So good news is there is no need for a tax. And the Conservatives with their few energy tips was all that was necessary for us fortunate to live here in this wonderful country. On the other hand Dion was only to quick to jump on the backs of families already facing financial hardships. BC lives under a black cloud thanks to our premier who has no problem bleeding out pockets with tells of environmental doom. Afghanistan’s environment on the other hand gets failing grades and is almost destroyed because of Bush’s mass destruction going on over there. If we want Oil and Gas prices to come down instead of trying to live like you are in a war zone, Lights out, watch the gas, watch for those bombers, duck? Want to move to Afghanistan or just want to go over there and bomb up the place and help destroy a continent and our neighbors homes. Have a good day given the weather permits.

  • The report is available at

  • Duncan, I’m not so concerned about people in the upper brackets, provided there are credits for those with little income and cuts in the lowest couple brackets.

    Right now the top 10% of earners pay more than half of all income tax and I guess this will rise a bit under the Green Shift (or perhaps rise a lot if they really do have huge carbon footprints). If those in the top 10% or so of income account for 60-70% of consumption among individuals, then they will be paying 60-70% of the carbon tax from individuals, whereas their tax benefit is capped by the 3rd bracket. If you have a small carbon footprint, you may gain, but if not, you’ll end up paying more tax. The important point is to protect those with low incomes, although clearly these people will also be further ahead, the smaller their footprint is.

    I am no fan of income neutral. However, I recognize that no carbon pricing scheme is worth much if it is never implemented. Given all the attacks on the idea of any comprehensive pricing of carbon, I suspect selling it as revenue neutral is Canada’s best shot at pricing carbon in the near future.

    I do think it is important for politicians to be honest about the cost to people from carbon pricing. If they can think of other ways to sell that cost, that is fine with me.

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