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News Release – August 18, 2005

Canada Can Reduce Greenhouse Gas Emissions by Using Fiscal Instruments and Incentives, New National Round Table Report Says

report coverOttawa, August 18, 2005 — Federal and provincial governments should consider a range of fiscal instruments to promote long-term reductions in carbon emissions, the National Round Table on the Environment and the Economy (NRTEE) has concluded.

Canada is committed to large-scale greenhouse gas (GHG) reductions and will host the world at the upcoming United Nations meeting in Montreal this November. New and innovative methods are needed to effectively address this monumental task as the global community turns to Canada to lead the next phase of discussions in the fall.

In a report released today, the NRTEE’s Task Force on Ecological Fiscal Reform and Energy recommends a constructive and effective approach to addressing this issue with a combination of broad-based and targeted measures, including subsidies, credits, user fees and taxes, to encourage reductions in the long-term of greenhouse gases and the promotion of key energy technologies.

Market-based instruments include the concept of “ecological fiscal reform (EFR)” – an integrated strategy to redirect taxes and government spending to encourage a shift toward sustainable development. EFR is based on the understanding that how the government taxes and spends has a tremendous effect on the way the economy works – and the way to maximize this impact is to ensure policies that work together to support goals such as sustainable energy.

The appropriate signals from governments to industry and consumers encourage the optimal allocation of resources to achieve environmental and economic policy objectives at a lower cost.

“EFR provides an effective way to achieve environmental goals while fostering a healthy economy,” said Glen Murray, Chair, NRTEE. “Canada has a lot to offer on climate change. EFR is a new way of thinking for Canada.”

In addition to helping reduce GHG emissions, the recommended measures would hasten the adoption of cleaner renewable technologies, such as wind turbines, geothermal energy, tidal power and biomass for electricity generation.

Economic instruments must be tailored to support the different development stage of each technology. These may include: broad-based price signals such as taxes and tradable emission permits for mature technologies; portfolio standards and production subsidies to encourage economies of scale for emerging technologies; and public R&D investments as well as fiscal mechanisms to leverage private R&D investments for longer-term new technologies.

Such market-based economic stimulants could also spur research into promising emerging technologies, such as the use of hydrogen to fuel cars and buses, the report notes.

“Governments in the past have typically used laws and regulations to force industries to clean up their operations,” Mr. Murray explained. “But our research and analysis suggested that market-based instruments that use a mix of economic incentives can be more effective in the long run.”

The report, entitled Economic Instruments for Long-term Reductions in Energy-based Carbon Emissions – State of the Debate, synthesizes the major conclusions of the two year multistakholder process – defining the major points of agreement and disagreement, exploring questions that surround the use of fiscal policy in specific sectors, and examining the broader context for the use of economic instruments in encouraging reduction in energy-based carbon emissions.

The NRTEE, an independent federal agency, is dedicated to exploring new opportunities to integrate environmental conservation and economic development, in order to sustain Canada’s prosperity and secure its future.

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