Provinces and cities need new fiscal tools to align economic and environmental ambitions

Climate and Energy Livable Cities

The following is an excerpt from The Policy Opportunity of Our Generation: Ecofiscal Reform in Canada’s Provinces and Cities, published in Public Sector Digest, February 2015, and made available online January 15th. This is the first of a four-part blog series that highlights how ecofiscal policies can help cities and provinces conserve water, fight traffic and reduce waste.

“Everything should be made as simple as possible, and no simpler,” Einstein famously said. While the principle behind ecofiscal policies—to put a price on harmful activities and encourage economically valuable ones—is straight out of Economics 101, the details of policy design matter a great deal. To be pragmatically implemented these policies must take into account specific economic, environmental, and social contexts. In a country as regionally and economically diverse as Canada, ecofiscal reform will likely be most successful at the provincial and municipal levels.

This is especially true as the majority of the issues these policies would address—from water, to waste, to traffic—fall explicitly under the authority of Canada’s provinces and cities. No one wants to make a federal issue out of municipal waste reduction. Even the problem of rising carbon emissions—a major national and global challenge—can be meaningfully tackled provincially, where significant jurisdiction over resource development and energy resides.

Provinces and cities need new fiscal tools to align economic and environmental ambitions in order to grow sustainably. A number of provinces—Quebec, Ontario, Nova Scotia—are carefully examining their fiscal structures with an eye to modernizing them. This past summer, Canada’s premiers agreed to move forward with a national energy strategy that explicitly addresses climate change, acknowledging that individual provinces must take the lead within their unique energy and economic contexts.

The challenges facing Canadian cities

Cities, where the vast majority of Canadians live, are also facing acute pressures to build long-term, sustainable infrastructure for growing populations. Ecofiscal policies present cities with a significant tool to tackle that challenge. First, they create incentives for sustainable actions and innovations that make our cities more livable. Second, they create a source of revenue that cities can invest wisely back into their communities and economies. As Calgary Mayor, Naheed Nenshi, explained: “Big Canadian cities are having a hard time just paying for their commitments to provide ordinary services, much less make needed long-term investments in essential infrastructure. It’s not realistic to ask them to find all the money just by raising property taxes or trimming fat in their operations.”

Canadians experience environmental and economic challenges viscerally at the local level. Adding ecofiscal policies to their toolkits gives provincial and municipal policymakers the opportunity to innovate solutions that speak to the needs of their constituents, their budgets, and their long-term priorities. What could these solutions look like? A few case studies from around the world, and here in Canada, provide a glimpse of what’s possible and how much further we can go. Stay tuned!

>>Read the next post on conserving water

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