Speeches | Second reading of Bill S-221, An Act to amend the Income Tax Act (carbon offset tax credit)

07 October 2010

Honourable senators, it is with great anticipation that I have awaited the chance to speak to this bill yet again. I almost feel that I do not have to sell Bill S-221 because it is such a good bill. Obviously, I have misjudged the sentiment, given what Senator Comeau just said, and I will have to speak directly to him.

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Honourable senators, this bill should gain a great deal of appeal amongst the Conservative members of the Senate, and I will tell you why: I honoured one of their family tax incentive programs by using it as a model for this program.

In Bill S-221, I propose that people invest in carbon credits designed to reduce carbon emissions that otherwise would have been emitted. For making such an investment, the citizen should receive a tax credit of 15 per cent, which is equal to the first level of tax in our system.

The Conservative government popularized that concept in several cases. I am aware of the incentive whereby parents who invest in sports programs for their children, such as hockey, receive a tax credit of up to $500 at a tax rate of 15 per cent, which equals a tax credit of $75 to the family. It is not a bad idea. In fact, I like the concept so much I adopted it for my carbon credit system.

Honourable senators, the system would require a voluntary carbon market that people could rely on and believe in, knowing that any money paid to an entity would take certain steps to implement energy programs and develop alternative energy to ensure that emissions otherwise emitted would not be emitted. For doing that, people would receive the 15 per cent tax credit. I have not placed a specific limit on that but it could be discussed and developed as this is implemented.

Honourable senators, if I were to put everything into carbon credits as a family member or as an individual and it encouraged an investment of $1 billion in carbon credits, the tax credit at 15 per cent would be $150 million. That is not insignificant but when compared to spending $16 billion on jets, it suddenly has perspective. Consider as well, honourable senators, that the billions of dollars invested by families in carbon would go directly to our businesses and our farms that have taken steps to reduce emissions. For example, Alberta's Premier Stelmach has implemented the first and only, I believe, cap and almost trade system in North America. It is not a perfect cap system because it is intensity based, but it is a step in the right direction; and good for him. Alberta has rounded up farmers who are reaping carbon credits by reducing carbon with carbon sinks and reduced emissions. They sell the credits to the companies in their cap system that need to reach certain standards but perhaps have not been able to do that yet. That money is going directly to Alberta farmers.

I do not know about other honourable senators, but I have never met an Alberta farmer who has too much money. Rather, I have met many Alberta farmers who do not have enough money. This is a 21st century way to take the climate change problem and turn it into an economic opportunity.

The other element captured by my bill is the potential to encourage individuals to do it. I will give an example of how powerful this can be. My wife and I have three children; there are five of us. Each Canadian is responsible for about six tonnes of carbon emissions a year. In our case, that is 30 tonnes. We could go to the European market today and probably buy a tonne for about $20. For $600 a year, our family could be carbon neutral.

Families across the country could do the same thing. Schools could collect bottles, sell pies and make their classrooms carbon neutral. This concept has all kinds of potential.

I do not know how many of my honourable friends understand it, but many people do not fully understand climate change or are concerned deeply about it but do not know what to do. This point was reinforced for me the other day as I was speaking to a woman who said, "I think people are just afraid to admit climate change because two things happen if they do. The reaction is almost overwhelming. What do we do? It is so big; it is the world. How do we solve it? Second, what can I do? There is nothing I can do."

I like this kind of project because it says to individuals that there is something you can do. You can buy a tonne of carbon, give that money to someone and they can reduce that amount of carbon for you. If it is a voluntary market that is sanctioned by the equivalent of the SEC or government, then you can know that it is really working.

It also will have the advantage of this money going directly into business. It is a stimulus project that would be levered to 100 per cent, from 15 per cent, by individuals investing in something intrinsically good for the environment and investing in businesses and farms that are doing things intrinsically good for the environment.

We encounter a number of arguments all the time when considering this kind of policy, specifically with respect to carbon credits. I will get these out of the way quickly. One thought is, "Climate change is not occurring so why would I worry?" I do not know that I meet anyone now who actually admits to believing that. They may still think it, but climate change is so obvious that most people now acknowledge that it is happening and are not about to stand up and say, "No, it is not happening"; and, of course, one has to be pressed to imagine that it is actually not happening.

The corollary to this viewpoint is that climate change is happening but it is not being caused by human activity. I am struck by that one, because if climate change is not being caused by human activity, we are in real trouble; if we are not causing it, we cannot fix it. I say to people who say that, "You should drop to your knees and pray that it is being caused by human activity because then we have a chance to fix it."

Climate change is happening. The science is overwhelming; it is being caused by human activity. We have to encourage the human activity that will fix it, which is what this bill is designed to do.

The other argument that has been used is that carbon credits have all kinds of structural problems: They represent hot air in Russia; they will not really do the trick, et cetera. I say to Conservatives who say that to me still, "You should talk to your Prime Minister because he is already committed to cap and trade, and carbon markets and carbon credits are the trade part of the cap and trade." It is a moot point for even Conservative policy now. We are into it; we just have not even started to develop the market for carbon credits.

Look elsewhere in the world. In Europe, there is a $100-billion-a-year carbon market. Yes, there have been some problems with it, certainly at the outset where the credits were underpriced. However, the fact is that huge companies with real caps to meet, sanctioned by governments and other agencies, are dealing on markets that work, that are real and that do result in direct reduction in carbon emissions, allowing these companies and individuals as well to work on that in an effective way.

It is interesting to keep in mind that carbon credits at this point, at $20 or $6 as they were for farmers in Alberta, are relatively inexpensive. That is a key point about carbon markets: They allow us to grab the low-hanging fruit as we allow and pressure our companies and our industry and others to work on reducing their emissions in a more paced way, because they can buy reductions very inexpensively elsewhere in Canada. Some would argue that it should be done elsewhere in the world as well if those markets are to work effectively. Carbon markets play an important central role in making the carbon credit system I am talking about work.

For those who are still concerned about carbon credits, the Western industrialized world, the market-driven world, has been dealing with stocks, bonds and securities for about 120 years in a sophisticated way. Now, you can buy a stock in a bank, hopefully a Canadian bank, and you have no way of knowing its real value. Why do you believe in its value? It is air. They do not even have money half the time. These are just electronic entries on computers somewhere.

Because we have structures, regulations, generally accepted accounting principles, we sometimes put people in jail if they mess with these markets. We have these structures that allow us to have confidence in those stocks. A carbon market credit is really just a stock, is a simple one at that. It probably does not require any more regulation or supervision than the stocks we buy and sell every day on markets around the world, places in which we do not even live, because we have confidence that those markets are regulated properly.

To recap, my proposal is modelled upon a Conservative proposal. It almost pains me to say that, but I am saying it because it is true. It is designed to encourage people to invest in reducing carbon emissions. We would encourage them by giving them that first level of tax credit, 15 per cent. It is not like it is an outright net expenditure in the sense that it has just gone into thin air. That 15 per cent and the other 85 per cent that individuals and businesses would put into doing this will go directly into businesses and farms in Canada. It has that business impact that is so important and powerful.

This proposal also has a psychological impact. Climate change is an overwhelming problem in one sense. We know that when people are confronted with it, they have to assess what it means to their lives and especially to the lives of their children and grandchildren. However, here is a concrete thing they can do to buy into that process, begin to understand it and then perhaps find other things they can do. Perhaps they can then put pressure on the Conservative government to do what it should be doing much more quickly in providing leadership.

This is a first step in leadership. It acknowledges the profound problem that confronts humanity. It is based upon the fact that carbon credits have many advantageous market mechanisms; that there is precedent for doing this in Europe; that it is a way of finding the low-hanging carbon reduction fruit.

If we add all that up, this is one heck of an idea, honourable senators. I would urge you to vote for it.


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