We operate in a bad systemCanada
The Montreal Gazette
University of Ottawa professor Stewart Elgie is the founder and chair of Sustainable Prosperity, a national policy-research initiative focused on market-based approaches to environmental protection and economic sustainability.
In 2001, he became the youngest man to receive the Law Society of Upper Canada's medal for exceptional lifetime contribution to law.
The Gazette's Lynn Moore spoke to him about his commitment to sustainable practices.
Q: You were among the lawyers litigating against oil giant Exxon over its 1989 oil spill. That experience led to the creation of SP and the desire to help corporations "do the right thing." How is that working for you?
A: Litigating over the Exxon Valdez spill, and seeing the devastation it caused, changed my life. I had been a young, Harvard-trained lawyer on Bay St., but I ended up founding Ecojustice, now Canada's largest non-profit environmental law organization.
I spent 12 years on the front line of environmental litigation, beating up corporate bad guys, with some success. But I eventually came to realize most of them weren't actually bad guys. Most CEOs would love to lower their environmental impacts, if they could still make a profit. The problem is that we operate in a bad system -one that fails to reward good environmental behaviour.
That realization led me to go back to school in mid-life to learn economics at Yale. After that I started Sustainable Prosperity; SP brings together top academics with business, environment and government leaders who share a commitment to building a stronger, greener economy.
Q: How's that going?
A: It's a lot harder than being a lawyer. We're talking about reshaping market incentives so they reward environmentally responsible behaviour and drive clean innovation. That won't happen overnight.
I get encouraged when I see companies that "get it" -and are going green and making money. And I am also encouraged when I see some government leaders trying to drive this transition.
Q: Governments often say that more protection of the environment will harm the economy. Do you agree?
A: That's old thinking. As Robert Kennedy Jr. says: "The economy is a wholly owned subsidiary of the environment." A strong economy and a healthy environment is possible, with the right policies. But that is not the path we are on now in most of Canada.
For example, air pollution costs Canada over $8 billion each year in health care and lost lives. Those are very real costs, but they are not reflected in market prices. If they were, clean wind power would be cheaper than dirty coal-fired power, and driving a hybrid car would be cheaper than a gas guzzler. So firms would invest in clean energy production and low-emission cars and buses -because they would make more money (as we've seen in European countries that have put a price on pollution).
The key is to start charging the real cost of using environmental resources, as we do for other resources. You can do that through emission trading or green fees or taxes. Canada is currently second last in the OECD in using these kinds of market instruments. That's not just bad for the environment, it hampers our competitiveness in a greening global economy.
Q: How effective are Quebec's carbon tax and climate change policies and are they second to those of British Columbia?
A: Quebec was the first place in North America to bring in a carbon tax. It deserves a lot of credit for that. B.C. was second.
Quebec's tax is set at a very low level -about one cent per litre of gasoline. It is not meant to change behaviour; its role is to generate funds for the province's climate action plan, which supports low-carbon initiatives by businesses, cities and households.
B. C's carbon tax is meant to change behaviour. It is now at 4.5 cents per litre of gas, and rises annually. All the revenues go back into personal and corporate income tax cuts. So companies and households that reduce their carbon emissions come out ahead economically.
My advice to Quebec would be that it should raise its carbon tax so it provides a real incentive to reduce emissions, and use the additional revenue to cut other taxes, to boost competitiveness. One option is to lower taxes on labour, as many European countries have done, since this provides an incentive to increase employment.
Quebec has also proposed developing a cap and trade system jointly with Ontario and some U.S. states. That could also be effective, but it will take a lot longer to create than a carbon tax. One disadvantage of cap and trade is that the price of carbon is very unpredictable, which is a challenge for businesses when making long-term capital investments.
Q: SP contends that carbon pricing can help drive innovation in technologies and business models. Can you give an example of this happening?
A: There are lots of good examples from Europe.
For instance, Germany brought in a significant carbon tax in 1998 and legislated premium prices for clean energy in 2000.
These two pricing policies have resulted in German renewable energy production more than doubling in eight years.
Investment in the sector has grown by 12 per cent per year, 300,000 new jobs have been created, and carbon emissions are down by 57 million tonnes (more than all of Canada's cars). Germany is now a world leader in wind and solar energy.
Another example is Norway. It brought in a hefty carbon tax in 1991. This tax motivated Norway's Statoil company to pioneer the world's first commercial-scale carbon capture and storage operation, which saves about one million tonnes of carbon annually.
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