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Canada Urged To Be Bolder On Environmental Tax Policies

by Mike Godfrey, Tax-News.com, Washington

26 December 2017


The OECD has urged Canadian policymakers to bring forward action on climate change to achieve the country's 2030 emission goals.

The OECD's new third Environmental Performance Review of Canada says that although Canada has reached a stage where it can grow its economy without driving up energy use, air pollution, and emissions, it remains the second most carbon-intensive OECD country (after Estonia) and the fourth-biggest emitter of greenhouse gases. Canada's emissions have declined by just 1.5 percent since 2000 compared with an average decrease of 4.7 percent across the OECD area.

"We applaud Canada's renewed determination under the current government to tackle climate change, and its leadership in international climate diplomacy at a crucial time," said OECD Environment Director Anthony Cox. "That said, Canada's own emissions-cutting objectives for 2030 will stay out of reach without swift and concrete policy action and greater use of economic instruments to wean the country off fossil fuels."

The report notes, on tax policy, "Canada has made good progress on carbon pricing, with carbon taxes or cap-and-trade systems in place in the four most populous provinces and a plan under the 2016 Pan-Canadian Framework on Clean Growth and Climate Change to introduce carbon prices nationally."

However, it notes that Canada's use of environmental taxes is the third lowest in the OECD after Mexico and the US, stating: "In a country whose vast territory means it generates a great deal more road and rail freight transport per capita, and per unit of gross domestic product, than the average, taxes on petrol and diesel for road use are very low, as are taxes on fossil fuels for industry, electricity, and heating. Pickup trucks, which make up four of the country's ten top-selling vehicles, are exempt from the 'green levy' on fuel-inefficient vehicles."

The report recommends that the Government ensure effective and timely implementation of the Pan-Canadian Framework and establish a mechanism for policy evaluation and adjustment and co-ordinate subnational climate policy and foster links between provincial carbon pricing systems. Exemptions aimed at smoothing the transition should be temporary and limited, it says. Further, it calls for Canada to review and adjust tax, royalty, and subsidy regimes that encourage fossil fuel production to meet a pledge to phase out by 2025 inefficient subsidies that encourage wasteful consumption.

It also recommends a review of taxation on energy use. In particular, it recommends reducing the petrol-diesel gap and revising taxes on fuel-inefficient vehicles to encourage the purchase of lower-emission vehicles.

TAGS: environment | tax | energy | Estonia | Mexico | environmental tax | carbon tax | Canada | trade

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