Friday, June 20, 2008

The Green Shift

St├ęphane Dion’s Liberals have released their Green Shift plan that would make big changes in our tax system. For a good summary, see this post by the Canadian Capitalist. Dion plans to shift some of the broad-based tax burden on all individuals and companies to just those who pollute.

So, the final price of goods and services that cause pollution would go up. Whether you support this type of taxation or not, it is clear to me that this is the only way to cause people to change. Begging people to be green is mostly ineffective. But taxing people less and making some items expensive may cause people to make different choices.

There are a number of big ifs in this plan. It will work

if the Liberals get elected (does not seem likely right now),

if there are no loopholes for polluters to get around the new legislation, and

if the government doesn’t cave to pressure to make exceptions for certain polluting industries.

It may not seem like it makes any difference to tax you $250 less and simultaneously make your living costs for the year $250 higher. But, prices won’t be uniformly higher, and this will cause you to make different choices.

I’m always suspicious when politicians tell me that some plan is revenue neutral. Even if it is revenue neutral based on current patterns of consumption, it may not be after spending patterns change.

Whether this is the right plan or not, I’m convinced that the only way to change our day-to-day choices and reduce greenhouse gas emissions is with financial incentives; basically making desirable choices cheaper and undesirable choices more expensive. The same approach is needed to reduce our garbage production.

4 comments:

  1. The $250 increase is just in direct costs. I think indirect costs will add up another 2% of a household's spending bill.

    The question is a if a shift of $1,250 or so will result in some change in our green house emitting ways. I agree with you it will but it will take time because initially people are more or less in the same situation as before financially and won't see a pressing need to change right away.

    Taxing garbage is a great idea. Whatever happened to the City of Ottawa's proposal to impose a charge based on the size of the garbage can.

    The only problem is that I'm suspicious of any government of any sort that says a tax is "revenue neutral". It starts that way initially but somehow morphs into an extra tax.

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  2. CC: I'm not a fan of charging for garbage after the fact. It makes more sense to me to impose a charge at the time an item is purchased. Charging for garbage picked up at homes rewards those who litter and punishes those who pick up litter. Another thing to consider is that I wouldn't want to be driving behind the guy who pushes a garbage bag out onto the highway to avoid paying extra garbage fees.

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  3. Agree 100% with Michael's remark above. I came here to say pretty much the same thing, though I had always thought of taxing the packaging when it's produced rather than when it's purchased. The latter seems like a much better idea.

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  4. Patrick: I guess if you tax the packaging at production time, then it would ultimately be passed on to the consumer at purchase time. So, I'd be happy with doing it either way -- whichever is easier. I'd apply such a tax to more than just the packaging, though. Even the item itself will end up as garbage at some point. Everything should be taxed based on what it contains and how much it will ultimately cost to deal with as garbage. There would be credits for recycling, etc. This could easily end up quite complicated, and so it would have to be thought out carefully to keep it as simple as possible while still being reasonably fair.

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