Within weeks of the tabling of the 2017 federal budget, Équiterre and its partner Environmental Defense consider that four major aspects of federal tax policy should be changed to reduce GHG emissions and generate revenues. These changes would support the policies announced in the Pan-Canadian Framework on Clean Growth and Climate Change (PCF).
Immediate changes to fiscal policies in Budget 2017 would provide early incentives to reduce emissions from transportation and the building sector. With the right price signal, these sectors can become early adopters and will be ready for future policy requirements contained in the PCF with regards to transportation and buildings.
Équiterre’s recommendations are also complementary to carbon pricing, ensuring coherent fiscal policies with regards to carbon emissions, particularly in restoring the neutral of the tax system with respect to investment in oil and gas production in Canada.
Équiterre Recommends to :
1. Address the Diesel-Gasoline Tax differential:
Raising the tax rate on diesel fuel to be equivalent to the rate on gasoline. Closing the tax gap could result in an additional $350-700 million in annual revenue for the federal government, while reducing GHG emissions by between 0.3 and 2 Mt annually.
2. Make the Federal tax on Fuel Inefficient Vehicles more Effective:
Adjusting the existing federal ‘Green Levy’ to include more vehicles, and increase rates for more expensive vehicles, could result in an additional $200 - $600 million in additional annual revenue for the federal government, while reducing GHG emissions by between 1 and 2 Mt annually.
3. Extend tax incentives according to buildings’ energy performance:
Current federal tax incentives for renewable energy and energy efficient equipment are too narrow to effectively encourage a “whole building” approach to energy performance. Expanded incentives could result in GHG reductions in the range of 0.5Mt to 3Mt per year, depending on the degree of take-up and the level of the threshold established.
4. Phase-out preferential tax treatment to oil and gas:
In order to deliver on the Government of Canada’s commitment to phase out fossil fuels subsidies and ensure effective implementation of the new federal carbon pricing mechanism, Budget 2017 must put in a clear timeline for this phase-out. Restoring tax credits and accelerated capital cost allowances to that equivalent to the rest of the industry could result in additional fiscal revenues up to $1,3 billion annually.
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