The Federal Liberals unveiled their Green Shift Plan today:

We will cut taxes on those things we all want more of such as income, investment and innovation. And we will shift those taxes to what we all want less of: pollution, greenhouse gas emissions and waste. We need to make polluters pay and put every single penny back into the hands of Canadians.

The plan proposes to tax greenhouse gas (GHG) emissions at $10 per tonne immediately and rise by an additional $10 per tonne each year until it reaches $40 per tonne within four years.

To offset the GHG tax, the Liberals propose broad-based income tax cuts. The lowest tax rate will fall to 13.5% from 15% and the middle brackets (currently 22% and 26%) will see a cut of 1%. They also propose a new child tax benefit worth $350 on top of all existing benefits but plan to replace the $1,000 employment credit (worth $150 today) with a $1,850 refundable employment credit for Canadians earning less than $50,000 per year. Also, Mr. Dion also plans to enhance the Working Income Tax Benefit and make the Disability Tax Credit refundable. Corporations and small businesses will see a 1% cut in the tax rate.

The Green Shift book claims that at $40 per tonne the average direct cost to a household will be approximately $250. The Green Shift website has a calculator that can be used to estimate the tax savings.

Mr. Dion’s plan is certainly a bold political gamble, especially at a time when Canadians are paying more at the pumps and at the grocery store. It is unclear to me how the plan will cost an average family only $250 but the tax savings accruing to every household with an income of up to $100,000 ranges from $420 to $2,700. How can it be revenue-neutral unless it comes out of someone’s pocket? And who is that unfortunate person or family who will be paying more?

This article has 24 comments

  1. The plan is revenue neutral, so there will be winners and losers. The winners? People who adapt to a world of expensive oil. The losers? Those who don’t. If you want to continue to drive 40 km to work from the suburbs then go ahead — but it will cost you. If you take public transit, drive a hybrid, bike or walk then there will be more money in your pocket.

  2. I haven’t studied the numbers, and so I don’t know if the assertion that the plan will be revenue neutral is credible. But, if these plans became law, then you can count on a shift in behaviour to reduce this $250 per household figure. Of course, this is the point of the plan. Dion needs to take into account changes in spending patterns to claim that it will be revenue neutral.

  3. Canadian Capitalist

    Gus: If I drive 40 km to work from the suburbs, I don’t pay more for gasoline under the new plan either. There is no new tax on gas because the current excise tax already amounts to $42 per tonne, more than the $40 the Liberals are proposing.

    The document says that we’ll pay more for propane for our BBQs, natural gas or oil to heat our home but as far as I can see they seem to say that it’s the only extra cost we pay. So, my question remains: who pays for this thing?

  4. Canadian Capitalist

    Ah, I think I get it: the document says “the average direct cost to a household is $250”. The indirect cost is probably $1,000. That would make it revenue neutral.

  5. Sorry, I was confusing the BC carbon tax with Dion’s plan (BC’s plan does tax gasoline). The people who pay are those whose actions result in an above average level of greenhouse gas emissions (other than gasoline) as compare to other Canadians. For instance, if you have a 4,000 square foot home that is heated by oil and you like to keep the temperature at 21C in the winter then you will pay for that privilege. If you use electricity that is generated from a coal-burning plant and you keep your 4,000 square foot home at 16C in the middle of a heatwave then you will also pay for that privilege. It all depends on your actions.

    The same story holds true on the corporate side…

  6. The per capita CO2 use in Canada I thought was something like 24 tonnes, so a family of 4 would be 96 tonnes a year. Their products now, at $40/tonne, will cost around $3840 more come year 4 of the plan . . . if they don’t change their nasty wasteful home heating ways.

  7. Canadian Capitalist

    The problem I have with the plan is that I’m not at all clear what the “average level of GHG emissions” is. I can figure out the exact benefit for our family but what is the exact cost? How can Canadians decide if the plan is better for their wallet as well as for the planet, if we can’t figure out how much it is going to cost us?

  8. I don’t think I’d mind to0 much if I could get some the technology that now available like this:

    ( not a rick roll I promise )

  9. Millionaireby45

    The only three things I hear about these days are: the state of the economy, the soaring prices of gas, and the environment. I find it hilarious when I hear most people talk about the last two. Most people want something done about the environment and feel that global warming is a serious issue that must be delt with immediately, however these same people complain about the price of gas non-stop. They feel that it is there right to have cheep fuel and drive as much as they want. The best thing to ever happen to the environment is high gas prices. If the price of gas all of a sudden went back to $0.50 / liter, do you think SUV and Truck sales would continue to suffer. Personally, I don’t think so. Plus if Oil was back at $30/barrel then there would be far less talk about alternative energy. Everyone wants something for free and does not want to give up anything. It is the “Not in my Backyard” mentality that I find hypocritical since the environment is in “Everyones Backyard”.

  10. Canadian Capitalist:

    There are plenty of calculators on the web that will help you calculate your carbon footprint. Just Google “carbon footprint”. Once you know your footprint then you can compare that figure to the Canadian average (which is huge by international standards). I don’t know what the average is for sure, but Traciatim has suggested a figure (although I’d want to verify the figure before making any decisions).

    If you and your family end up being above average polluters then you have two choices: continue on “as is” and pay for that privilege or change your behaviour so that you benefit from tax shifting. The choice is yours and that’s the beauty of tax shifting policies — nobody is forced to do anything provided they are willing to pay the price for “bad” (i.e. polluting) behaviour.

  11. Millionaireby45:

    You hit the nail on the head. Everyone freaked out after watching Al Gore’s documentary, but IMHO relatively few people changed their behaviour as a result. It is only in the face of high oil / gas prices that people began to change their behaviour. Everything comes down to money — and that is why tax shifting policies are so effective.

  12. The problem with carbon calculators (which I know well, because I helped design one that’s widely used in the United States), is that your emissions vary widely by location. In Québec, where I live for example, most of our electricity is produced by hydropower, which is not the case in a number of other provinces. The average per-capita value for Canada doesn’t do much good in cases like that; you need a carbon calculator that asks you where you live, and which bases its electricity assumptions on your location.

    Electricity, heating (which in some provinces is also electricity), transportation, and waste are going to be your main sources of greenhouse gas emissions.

  13. Hot investment tip: If you know of a company that produces sustainably harvested charcoal for grills, I bet they’ll do a booming business if people start switching back to charcoal from propane. I actually made the switch myself earlier this year and while charcoal is definitely more time-consuming (it takes a while to get the coals ready; I use one of those starter chimneys instead of lighter fluid), I do feel like my grilled food tastes better cooked over hardwood coals. 😉

  14. Why don’t they just stop taxing environmentally-friendly products and maintain the current sales tax rate on the items that aren’t?

  15. Brad,

    Can you recommend a carbon calculator?

    Given that no calculator will be entirely accurate, it’s not possible to determine exactly how better (or worse) off you will be with Dion’s tax shifting plan. However, the important thing is that it will nudge a significant number of Canadians into gradually changing their behaviour and therefore reducing GHG emissions.

  16. Canadian Capitalist

    Mby45: What’s new? People will say anything until they have to back it up with money. Apparently, 60% of Canadians told pollsters they support a carbon tax. We’ll see whether they still support it after learning more about this plan.

    Gus: Of course, people are not going to change until it hits them in the pocketbook. The question is — if they can’t figure out how much it will actually cost them, are they likely to vote for it?

    I actually think savers will like the carbon tax. After all, the money you save isn’t producing GHG and if you household is an average emitter, you pay the same as other average emitters but you are getting back much more in tax cuts. But savers are in a minority and it is the spenders who will decide the fate of the plan.

  17. Gus, I’ll see if I can find a good Canada-specific carbon calculator; if I do I’ll post a link here (or if someone else knows of one please post a link). The emission factors for electricity should be customized for each province; emission factors for other sources such as transportation and waste are not region-specific. In the US, you practically have to customize electricity emission factors by zip code (which some calculators do), because there are so many utilities and their service areas overlap.

    One other thing about the Green Shift plan is that they say the 700 largest emitters (power plants and energy-intensive industries) will foot the majority of the bill. However, they don’t say what that will mean for those of us who purchase services and products from those emitters. Clearly they will pass the costs on to consumers, and this could create large disparities across provinces. I’m sure they’ve thought that through, but I didn’t see anything about it in the Green Shift document.

  18. So far the best simple calculator I’ve come across that works for Canadians is this one:

    It’s going to give you a very rough estimate, but at least it takes differences across provinces into account. It doesn’t include waste emissions, however.

    There are dozens of carbon calculators out there, and more springing up every day; it’s impossible to keep track of them all.

    All of the calcuators have to walk a fine line between accuracy and ease of use. If you want a really accurate calculator it starts looking like a tax form, and we all know how much fun it is to fill out a tax form. So most organizations and agencies opt for the easy-to-use variety, which then requires broad assumptions. The results are probably broadly accurate but by no means precise and could be off by many tons.

  19. Here’s the link to the Liberals’ Green Shift Tax Benefit Calculator:

    and to counter the opinions of “The Inconvenient Truth”, here’s a link to the documentary “The Great Global Warming Swindle”:

  20. Wiser Miser:

    Climate Change is real. All peer-reviewed papers published in bonafide scientific journals agree on this. It’s time to start solving the problem.

    If you don’t believe Al Gore, try this:

    If you don’t believe the UN or scientists in general, try a well-respected economist’s point of view:

  21. Open ethics question: Is it right to tax people who live near coal-fired plants more for electricity than those who consume hydro power? Honest question. I’m not entirely sure, myself. I suppose it is, if you want to prompt people to move to areas with more environmentally friendly energy sources, and encourage clean energy development.

    Also, I think this new carbon tax would be a bureaucratic nightmare. Does everyone remember the billion+ dollar gun registry? Yuck.

  22. Leading Edge Boomer

    One of the details of the Green Shift, that seems to have been ignored, is that the government would send every senior citizen $600 a year to help offset increased costs due to the carbon tax. And of course seniors would have the decrease in the income tax as well.
    Do you think this is fair or wise?

  23. Pingback: The Green Shift |

  24. Young Capitalist

    The baby boomers are the generation that got us into this mess and now we create new taxes for ourselves and send them 600 per month and lower their taxes. I do not think this is fair or wise.