Economist DT Cochrane and Katrina Miller, executive director of Canadians For Tax Fairness, authored a report titled Taxes and the Path to a Green Economy. It is unlikely to be given attention in Canadian media properties owned by the rich and the super-rich, but is worth our close attention.

Governments conduct public relations campaigns to convince citizens that maximum attention is paid to climate change, and the Canadian government is investing in climate action, largely through the tax system. But, federal and provincial systems of sales and income taxes and natural resource rents¹ are designed to enrich the largest source of greenhouse gas emissions: the fossil fuel sector.

While the price of mitigating harms from climate change remains uncertain, all estimates fall well below the cost of inaction. Given the scope, scale, and uncertainty of the climate crisis, enticing the private sector through tax credits is insufficient, and as currently structured, will exacerbate economic inequalities.

Canada’s public sector needs to take a leadership role in a “mission-based” approach to economic transformation. Targeted public investment, such as for zero emission public transit or for transforming public infrastructure, can create more stability and certainty for private sector involvement while guiding a more equitable and effective transition toward a sustainable economy.

In 1966, the Royal Commission on Taxation — led by Kenneth Carter — published a comprehensive report advocating significant reforms to make Canada’s tax system more fair. While climate change was obviously not on the radar of the Carter Commission when it undertook its study, inequality was.

The Commission identified equity as the abiding and overriding principle for a tax system, with efficiency and effectiveness as two additional principles. Equity was understood in terms of “economic power”. Commissioners believed the tax system should be highly progressive as a way to ensure that those with the greatest economic power contributed the greatest share to government revenue.

As public funds circulate through the economy, they tend to end up siphoned into corporate profit and/or pools of highly concentrated personal wealth. This dynamic was made clear during the pandemic.

Significant government spending helped lift over one million people out of poverty. However, it also contributed to Canadian corporations increasing their annual profits by $196 million in 2021 and $275 billion in 2022. Over those two years, the 100 largest publicly-listed corporations distributed $124 billion more to shareholders than in 2018 and 2019.

Having a progressive tax system allows us to reclaim some of those public dollars — and the economic power that comes with them — in order to redistribute it through government programs, supports, and investments. The federal income tax structure has remained generally progressive since the Carter Commission but has failed to keep up with the growth of market income inequality.

Because governments need to make large investments in economic transformation, the revenue and redistribution roles of the tax system are paramount. Without systemic changes, money spent will tend to accumulate with corporations and their owners, who have little public accountability to ensure Canada meets its climate and equity goals. In fact, they may actively work against those goals. The government will need to return public funds to public hands with the goal of rebalancing economic power.

The authors note those most responsible for greenhouse gas emissions are also those most capable of paying for climate action.

Since 1990, Canada’s emissions have decreased by a modest 3.1 tonnes per person. However, when we look at the distribution of emissions, we find that the bottom 90% reduced their emissions by almost 5 tonnes per person, while the top 1% increased their emissions by 34 tonnes per person.

¹ Total natural resources rents are the sum of oil rents, natural gas rents, coal rents (hard and soft), mineral rents, and forest rents.