Thank you for that question and for following the Fraser Institute's work. I'm pleased to hear that. There are a few things I'd like to say.
First of all, I'm not an environmental policy expert, but I will refer you to work that we've done that has measured the quality of Canada's environment over longer periods of time. Quite surprisingly, we find that we do a pretty good job in this country of maintaining a good environment. That's something that I think Canadians should be proud of. I think that's an important backdrop for understanding what types of environmental policy measures we take. But carbon is different, obviously, given the types of issues surrounding it.
I'd like to say a couple of things about the way carbon pricing is implemented in practice versus the theory behind it. There tends to be a disconnect. In theory, a carbon tax that is more economically benign has features that we do not see in practice. For example, implementing a form of carbon pricing needs to be done concurrently with removing any existing regulations that serve the same purpose of regulating the emissions. Otherwise we could have basically a double hit to the same type of activity. So, we don't see that type of implementation where there is a retraction of existing regulations that serve the same purpose as carbon pricing.
In addition—and this is a very important feature of how carbon tax is implemented in practice—we don't see anywhere in the world, and certainly not in Canada and certainly it won't be the case with a federal mandate of carbon pricing, where provinces are required to offset new revenues through the carbon pricing, however it's implemented, by reductions in other forms of taxation. This is important for many reasons. Again, it helps mitigate some of the economically damaging effects of the carbon tax. So, the federal government, in it's mandate, has not specified how exactly the provinces must use any new revenues they generate from the mandate, and there has been no interest, certainly, not even in B.C., which at one point did have a revenue-neutral carbon tax—it no longer does. Even in B.C., the plan with our current government is to raise the price per tonne with no offsetting reductions in other taxes like personal or corporate income that could mitigate some of the damaging effects of a carbon tax.
It's unambiguous that carbon pricing will put Canadian firms that are emission intensive at a disadvantage. The issue is about what the magnitude is, but it certainly will do so and it will do so at a time when business investments slow, at a time when our competitiveness is down. So, this is yet another policy that will have to be dealt with by businesses, investors, and entrepreneurs in the country at a time when we actually need pro-growth and pro-productivity types of policies.
It's so important to understand where we are in North America. We have a southern neighbour that has essentially put on hold or put aside any desire to implement a similar type of policy. So, when you think of people contemplating where to invest their next dollar or production facilities in Canada near the border, we could conceivably see situations of businesses moving south of the border where they don't deal with the same types of production costs that come from a carbon tax. It's more perverse than that in that we don't see any environmental benefit because the production activity is really just being shifted from Canada to the United States.
So it's important to understand the area of the world we are in. With a southern neighbour that's not really interested or hasn't expressed any interest in pursuing carbon pricing, I think it makes it all the more concerning for Canada to go at it alone in a North American context.