Abstract

Policies to shape the transition to a low carbon economy will require a broad social consensus.To avoid the present problem of carbon leakage and efficient revenue redistribution, it is necessary to consider the big picture objective and re-evaluate the outcome that would be expected from a carbon taxation regime. All too often, environmental taxes are traditionally designed to restrict and regulate unsustainable behaviour with a focus on revenue generation and not effectively monitored to meet the specific environmental objective. As all goods and services ultimately serve the purpose of consumption, thus the responsibility for the emissions arising from the production and transportation of goods and services should be shared by the individuals who create the demand for them. This paper aims to provide a rationale for a carbon taxation regime that targets consumption and is based carbon accounting methods. Such a regime, would not only ease the pressure on businesses by shifting the taxes on to the consumers, but it would promote consumer awareness of emissions embedded in consumption. The shift to a focus on consumers as opposed to producers would allow companies to bring innovative solutions to the market place. This paper discusses the need for a consumption-based carbon tax and the Canadian policy capacity to successfully implement such a taxation regime. We discuss the implementation methods, and evaluation of the policy, throughout its life-cycle. A second installment of this paper focuses primarily on recycling of the revenue and how governments could look for the right recipe that will drive societal change and encourage the development and adoption of carbon-frugal solutions, without imposing debilitating burdens on companies and consumers.

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