A Revenue Neutral Carbon Fee is the Best Option for Ontario

A Revenue Neutral Carbon Fee is the Best Option for Ontario
Posted on February 20, 2015 | Rolly Montpellier | Written on February 20, 2015
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Author's Note:

Author's Note:

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. I believe that the best mechanism is the Carbon Fee and Dividend.

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.

 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.

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%.

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.

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)

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About The Author

RMontpellier-Below2C's picture

Roland (Rolly) Montpellier is the co-founder and Editor of Below2°C. He’s a climate activist, a climate communicator and a blogger. He’s a member of Climate Reality Canada, 350.Org (Ottawa), Citizens’ Climate Lobby (... More