Emissions and remissions: using the tax system to wipe out greenhouse gases in Canada

It looks like the federal Conservatives are thinking hard about giving a tax rebate to buyers of hybrid cars. As I argued in Taking the giant step, this would be the best way to get more of these efficient cars on the road. The faster we do this, the faster auto manufacturers will respond to the next wave of demand, which is to increase the distance hybrids can go on pure electric power.

This will make driving in provinces like British Columbia, where grid electricity comes with low emissions (a paltry 24 grams of CO2 for every kilowatt hour generated), as clean as riding public transit.

Harper and company could help other provinces bring their power-sector emissions more into line with those of BC, Quebec, Manitoba, and Newfoundland-Labrador by making it worth their financial while to invest in low- or zero-emission generation technology. As I pointed out in Backing the winners, the most economically feasible way to generate utility-scale clean power is by fissioning uranium and burning gasified coal (and capturing the carbon emissions).

Introducing a clean–power production tax credit, along with other targeted measures like loan guarantees and construction delay insurance, could persuade investors to build generating plants based on these technologies.

Would these measures fly in the current Parliament? As I mentioned two weeks ago, New Democrat anti-nuclear dogma might pose an obstacle to such a plan. The NDP also complains incessantly about “corporate welfare for rich Alberta oil companies.” By this they mean the slew of tax breaks oil companies allegedly get (never mind the federal turnaround on income trusts, or Alberta’s recent cancellation of the royalty tax credit). If Harper were to frame tax breaks for zero-emission generation projects in a way that Jack Layton could spin as an environmental victory for the NDP, he might get the NDP’s support.

And one way to do this would be to start an emission trading scheme in Canada. This would enable companies to forward-purchase carbon credits as a way of buying down initial capital costs. The NDP, fearful of bleeding green support to other parties on the centre and left, desperately need to show their constituents they can effectively steer environment policy. They would surely support emissions trading.

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