Category Archives: economy

Dr. Ron Colman – “A Sobering Place to Begin”

economy, green party

The following is one post in a series: “Reporting Back: Green Party of Canada Policy Conference, Halifax“

Dr. Ron Colman, founder and Executive Director of GPI Atlantic, began by placing Environmental Tax Shifting (ETS) in context. ETS, he explained, is a second step. The first step must be to assign real value to things like our environment and volunteerism, for example, that are currently not valued by our economic indicators at all. That’s a sobering place to begin, he said, because of course we should already be valuing these things. But we’re not.

On the flight to Halifax, I flipped through an issue of The Economist. The good news is that a large amount of the magazine was dedicated to the dangers of climate change (including, but not limited to economic dangers) and the need for action. Yet, there, at the back of the magazine, was the standard two-page spread of the GDP of countries around the world.

The GDP isn’t a problem in itself; the problem is how we use it. Increasingly, the GDP is assumed to be a measure of wellbeing (generally, how well things are going). That, despite warnings over sixty years ago by GDP architect Simon Kuznets, who said that’s exactly the sort of thing the GDP shouldn’t be used for.

In Economics 101, the economy is described as a perpetual motion machine, completely separate from other systems. Of course, the reality is that the economy is a sub-system of the biosphere, with both inputs and outputs. Conventional economics still ignores that, and, in the words of Colman, is therefore “being taught all wrong.”

There are some fun examples that demonstrate why we live in what Colman called a “distorted market economy.” The extreme example that I’ve used before is that if we cut down every tree in Canada, our GDP would skyrocket, yet of course that wouldn’t actually be good for the economy or anything else. A real-life example is the Exxon Valdez, which contributed more to the GDP of Alaska by spilling its oil (because of all the money spent on the clean-up) than if it had delivered its cargo.

Colman gave another example to illustrate the absurdity of not including volunteer work when measuring the size and value of an economy. If you hire a housekeeper, he explained, the GDP goes up. Marry your housekeeper, and the GDP goes down. That’s entirely false, since no actual expansion or contraction of the economy has taken place, just a transfer of work between the paid sector to the unpaid sector.

So, that’s the problem. The solution is a Genuine Progress Indicator, or GPI. The GPI tracks genuine progress by creating a set of new accounts that value human, social, and environmental resources. Only within the context of genuine progress, Colman argued, can we make any subsequent tax shifts “systemic” instead of “episodic.” In other words, once triple-bottom-line resources are accounted for, externalities are internalized, and prices reflect the true costs of production, the market will be more efficient, less wasteful, and require less government intervention.

“This room should be full of right-wingers,” observed Colman. “Market economists should love this stuff!”

Dr. Peter Victor – Managing Without Growth

economy, green party, ,

The following is one post in a series: “Reporting Back: Green Party of Canada Policy Conference, Halifax“

Dr. Peter Victor from the University of York York University went next, with a presentation called “Managing Without Growth.” Building on what Colman had said, Victor observed that economic growth has become “the over-arching policy objective” (as in, the ultimate objective of most government policies, towards which their effectiveness is measured) of countries around the world.

This development is extremely new, having only emerged about fifty years go. Go back only a little further on a evolutionary timeline — say, four hundred years, and we didn’t even have the modern notion of “progress.”

Victor demonstrated three main realities:

  1. Whether you like it or not, growth is not possible in the long term.
  2. Growth does not bring happiness. While real income has increased in the US since 1945, the percentage of people who describe themselves as “very happy” has decreased. While early levels of income increase do contribute to happiness, the effect drops off after a point. The results are matched around the world.
  3. Growth is not particularly effective at eliminating poverty, creating full employment, or safe-guarding the environment. Since 1976, as both the GDP and greenhouse gas emissions have gone up consistently, levels of unemployment and poverty have bounced around.

(During the question and answer period following his presentation, we discovered that point number one really needs to be hammered home with some economists. They’ve been taught that growth is not only good, but critical. Victor kept repeating something to the effect of, “ok, fine, but you can’t have growth for ever, so even if you’re right about how great it is that’s irrelevant.”)

Much of Victor’s presentation was actually very technical, but also possible for a lay person like me to understand. He’s created an economic model called LOWGROW, where he can plug in different variables (income tax, carbon tax, etc.) and see what happens to the economy (GDP, greenhouse gas (GHG) emissions, unemployment, etc) over a timeline. It’s sort of like a simulation video game, where the goal is to lower GHGs as much as possible, while also raising levels of employment and holding the GDP steady.

The fun thing (well, fun for nerds like me at least) is that you can play with the model yourself if you want. It’s available for download here.

It’s important to note that Victor is not advocating for a zero or low growth policy exactly. He’s simply trying to demonstrate that you can have a healthy economy and environment without growth. That’s important, because concern about maintaining economic growth is often a barrier for people who would otherwise be sympathetic to green policies.

Elizabeth May often points out that humans stop growing once we enter adulthood. That doesn’t mean we don’t continue to “develop” in a qualitative sense.

Amy Taylor – Nuts And Bolts of ETS

economy, green party

The following is one post in a series: “Reporting Back: Green Party of Canada Policy Conference, Halifax“

Amy Taylor from the Pembina Institute presented on the details of how Environmental Tax Shifting should be implemented. The goal is to internalize costs, and can be accomplished in a number of ways, including regulation, trade permits, and environmental pricing, which includes subsidy removal, taxes, charges and user fees.

There are three kinds of ETS:

  1. Broad. For example, a shift from income tax to consumption tax.
  2. Sector Specific. This shift occurs within one industry, so that taxes are reinvested to make that industry more efficient and environmentally responsible.
  3. Individual reform. For example, deposits on beer bottles.

The good news is, other countries have already tested this stuff out and shown that it works, so we don’t have to jump before we look. (Come to think of it, that’s also bad news, because it means we’re already behind.) For example, Germany increased a fossil fuels tax while decreasing employment insurance charges. Sweden gives efficiency rebates to those who purchase more energy efficient vehicles.

Taylor concluded with two lists. First, things we should conceder taxing (or taxing more): water consumption, municipal waste, green house gas emissions, motor vehicle pollution, deforestation. Second, taxes we could reduce: income, capital, property, payroll charges, sales taxes.

Andrew Van Iterson – Green Budget Coalition

economy, green party

The following is one post in a series: “Reporting Back: Green Party of Canada Policy Conference, Halifax“

Andrew Van Iterson is a former Green Party candidate, and as such it’s not surprising that he built on what Amy had said by explaining how to sell the tax shift. If this is going to be successful, some key elements will be:

  • Transparent revenue neutrality. ETS can’t be seen as a tax grab, and it needs to be very clear to everyone which taxes are going up and which ones are going down.
  • Most Canadians should have no net increase in their tax burden.
  • Promote the benefits and the long term advantages of ETS.
  • ETS needs to be phased-in and predictable so that there’s less of a price shock. Advanced knowledge also contributes to long-term planning. (See the Income Trust announcement as an example of what not to do.)
  • Account for regional (provincial) differences. Different taxes are going to hit different regions in different ways, and we need to be aware of and sensitive to that.
  • Any exemptions to ETS must be conditional on performance achievements, investments or covenants. Don’t exempt the most polluting industries, as has sometimes happened in Europe.

Transparency is helped by ensuring that at least a portion of funds collected through environmental taxes are recycled back into prominent environmental programs so that the public can see clear benefits.

Van Iterson also emphasized the importance of ensuring that ETS (for example, a differentiated energy tax) does not hit the poor harder. He suggested rebate cheques (along the lines of existing GST rebates) and reduced income tax at lowest brackets. Businesses should be provided with R&D funding for developing technologies, reducing pollution and increasing efficiency. Recycled funds should be targeted to the hardest-hit sectors, based on production.

It should also be emphasized that research suggests that ETS does not hurt competitiveness. The biggest thing that’s needed now is political leadership and advanced research, so that ETS can be sold on a very practical, “how does it affect me” level.