Nicolas Tremblay, a subscriber to our Courrier de l’ économique, wondered whether eco-fiscality was sufficiently used in Quebec. Unequivocally, Quebec deserves a C in this area. As an economic update approaches…
In its sixth opinion, submitted on July 3, the Advisory Committee on Climate Change remains formal. Internationally, climate action remains largely insufficient and, without accelerating efforts, we will no longer be able to limit warming to 1.5°C, or even 2.0°C. “The situation in Quebec is no exception: the evolution of GHG emissions on Quebec territory is not part of a low carbon and energy trajectory,” was the response.
“On several occasions, the Quebec government has demonstrated a form of leadership in climate action. […] However, the Committee notes that, until now, these actions have not led to the structural (and behavioral) changes required to promote decarbonization and energy sobriety. »
The Committee points in particular towards the cap and trade system for GHG emission rights (SPEDE) – or carbon exchange – and the various eco-fiscal measures, which have not given a sufficient price signal to induce the necessary reduction in GHG emissions. “Despite growing awareness, the government’s actions have not made it possible to mobilize all of society’s stakeholders in a commitment commensurate with the crisis. » Which is not without urging a rebalancing of the arbitration between the two user-pays and polluter-pays approaches.
In this context, the Advisory Committee proposes 26 recommendations grouped according to six strategic areas of intervention. In particular, there is the suggestion of increasing carbon pricing and increasing the use of eco-taxation. “Until now, the government has mainly favored financial aid, but the Committee emphasizes the limits of this approach and recommends more restrictive measures to accelerate the transition. »
Especially since the pandemic, followed by the slowdown in economic activity, changed the situation by bringing Quebec back into budget deficit territory. This more austere situation will make difficult an environmental offensive favoring the use of subsidies. We saw this with the announcement of the gradual reduction in financial assistance granted for the acquisition of electric vehicles and the end of the program, scheduled for December 31, 2026.
We therefore invite changes to the regulatory framework of the SPEDE to induce a more coercive increase in the carbon price, further encouraging a transformation of production and consumption methods. It is also suggested to increase the importance of eco-fiscal measures by indexing the measures currently in force, by deploying new measures complementary to the SPEDE at the national level and by the establishment of measures at the municipal and regional levels.
Little used in Quebec
In its 2021 inventory of ecofiscal measures in Quebec, the Research Chair in Taxation and Public Finance (CFFP) at the University of Sherbrooke indicated that the international comparison showed that ecofiscality remains little used in Quebec . The measures identified and quantified in the report generated revenue representing 1.6% of GDP in 2019, below the OECD average (2.1%). “A stricter application of the concept of “taxes linked to the environment” (which excludes in particular revenues from the SPEDE, royalties associated with recycling or even rights and permits on forest resources), reduces this proportion to 1.2 % of GDP. Based on this strict definition, Quebec would rank 4e rank of countries using eco-taxation the weakest among OECD countries,” write the authors.
As for the doubt about the effectiveness raised by the Advisory Committee on Climate Change… By taking the figures from the CFFP, still on the basis of the initiatives identified on Quebec territory, we observe that the cost of ecofiscal measures borne by individuals and companies was 7.3 billion dollars in 2019, whether directly, notably through green taxes and environmental rights, or even indirectly, through revenue losses associated with environmental tax expenditures.
The vast majority of revenue from environmental levies was linked to energy consumption (4.5 billion). Of this, federal and Quebec taxes targeting oil and diesel used for transportation purposes alone generate more than 3.3 billion, or 46% of the total calculated eco-fiscal levies. On the other hand, 968 million were drawn from the SPEDE. “For their part, revenues from transport taxes, linked to the ownership and use of motor vehicles, are the second group of measures showing the highest ecofiscal collections. Licenses and registration fees alone account for $1.1 billion,” the authors add. This is all part of the perspective that fuels constitute a tax base which will be compressed over the coming years with the advent of electric vehicles.
This did not prevent GHG emissions from the road transport sector from increasing by 16% between 1990 and 2021, to use data from the Advisory Committee.
Quebec also uses eco-taxation on pollution and resources, but “these two categories generate little revenue as a proportion of GDP despite the significant challenges to which they respond,” adds the CFFP.
What to conclude from all this?