Quebec and Canada tax pollution very little. Almost half the average for OECD countries, according to a study by the Chair in Taxation and Public Finance at the University of Sherbrooke.
In Quebec, tax revenue from environmental taxes (federal and provincial) corresponds to approximately 1.2% of GDP. Quebec is thus at the bottom of the ranking, at 35e rank out of 38 states. Only Canada, the United States and Colombia tax pollution less in proportion to the size of their economy. On average, the countries of the Organization for Economic Co-operation and Development (OECD) tax pollution to the tune of 2.1% of their economy.
“There is little recourse to ecofiscal measures in Quebec to deal with climate change,” says Professor Lyne Latulippe, principal researcher at the Chair in Taxation and Public Finance.
This position at the bottom of the ranking could be explained if Québec had, in general, a low tax burden compared to other OECD countries. But it is rather the opposite: Quebec is the 11e OECD status for the tax burden (39% of its GDP; OECD average: 34% of GDP).
As part of its study, the Chair in Taxation and Public Finance made a second estimate for Quebec with its own definition of environment-related taxes, more generous than that of the OECD. It skews the comparison a bit because we use the stricter OECD definition for other countries, but it’s interesting. According to this extended definition, Quebec taxes pollution to the tune of 1.6% of its GDP, which would give it the 27e rank out of 38 states, still below the OECD average (2.1% of GDP).
7.3 billion / year
Tax revenue from federal and provincial environmental taxes / measures in Quebec in 2019-2020
By way of comparison, the total revenues of the Government of Quebec were 118 billion in 2019-2020. Three quarters (74%) of this 7.3 billion sum in environmental taxes / measures come from four measures1 :
- the provincial gasoline tax (2.2 billion / year)
- the federal gasoline tax (1.2 billion / year)
- provincial driver’s license fees and registration fees (1.1 billion / year)
- the sums generated by the carbon market (968 million / year)
Problem no 1: it is to limit energy consumption
According to the Chair, there are several problems with taxes related to the environment in Quebec. First of all, you have to define the basic objective. Is it to limit CO emissions2 (pollution) or generate tax revenue? “The idea of eco-taxation is to limit consumption [d’énergie], it’s not that there is more consumption [d’énergie] to have more income, ”says Professor Lyne Latulippe.
Problem no 2: how this money is invested
Another issue: in addition to the carbon market, the other revenues from taxes linked to the environment mostly go directly into the government’s consolidated funds. They are not necessarily reinvested in environmental initiatives. “They are used in particular to improve roads”, illustrates Professor Lyne Latulippe.
Problem no 3: no automatic indexing
The Chair launched the idea of automatically indexing environmental taxes. According to Quebec’s sustainable development commissioner, nearly two-thirds of provincial measures have not been revised since 2015. Gasoline tax rates have not changed since 2014 in Quebec and since 1995 at the federal level. The provincial contribution of motorists to public transport has been $ 30 per year since 1992. To the extent that the behavior of Quebecers changes – especially if they reduce their gasoline consumption with the purchase of electric cars – it will be necessary to increase rates to keep the same tax revenues, recalls Professor Lyne Latulippe.
The office of Quebec Finance Minister Eric Girard did not respond to questions from Press.
1 These amounts are for the 2019-2020 fiscal year, according to the compilation of the Chair in Taxation and Public Finance at the University of Sherbrooke.
Consult the Chair’s ecofiscal study