Green Economics Primer

Frank de Jong, et al.

[A document issued by the Green Party of Ontario, Canada, October 2004. Additional authors: Mike Pilling, Kathie Brosemer, Mike Schiner, Stewart Sinclair, Paul Charbonneau, Doug Smith, Mark O'Brien, Rob Spring, John Fisher, Scott Vokey, Bill Hulet]

Preamble: There are two types of green economics: subsidy-driven green economics and market-driven green economics. Greens gravitate to market economics since it requires less government intervention and is more politically palatable.

The market was originally theorized by Adam Smith to internalize all costs in order to be fair and efficient. However, since businesses in an industrial economy make money by externalizing costs, the business lobby has influenced governments to establish policies and set rules that enable business to externalize costs. This creates social, economic and ecological inequities and inefficiencies.

Presently the market externalizes most ecological costs onto future generations, the poor and other species. Greens seek to establish policies that enable the market to once again reflect all costs. We would modernize Adam Smith by employing the "green" hand to establish markets that are transparent and democratic in order to create a green society with minimal government subsidies or micro-management.

Government shouldn't participate in the market but only regulate it. For example, government should not build wind turbines. Rather, government should eliminate the hidden subsidies for electricity through full cost pricing, so that businesses and cooperatives will respond to market indicators by building the turbines without subsidies. The same goes for transit, organic agriculture, affordable housing, energy conservation, ending sprawl, etc. When the market reflects true costs, government subsidies are no longer needed.

Greens call for ecological fiscal reform and revenue-neutral green tax shifting so that businesses that adopt green production processes will increase their profits, and businesses that stay grey will be taxed more heavily. Businesses should not be taxed for hiring people or for making a reasonable profit. Instead, businesses should pay levies and fees for squandering resources, using land inefficiently and polluting the planet. People should not be taxed for holding down a job, but we should pay for the amount of land, energy and resources we use. Businesses and shoppers always follow the path of least tax resistance and should be able to save money by choosing green products and green lifestyles.

Land and natural resources are held in common by the pubic (and also belong to future generations and other species). When the community grants the privilege of using land or resources to a business or individual, the community should be recompensed for this privilege. Since the dynamism of a particular community or society determines the value of local land and resources, individuals and businesses should not be allowed to earn windfall profits off of these resources that rightfully belong to that community. Land value taxation and resource taxes insure that community-created wealth accrues back to the community, except for a fair profit to the business or individual who, through their labour or ingenuity, has improved the land or used the resource efficiently.


1) It is better to tax "bads" rather than "goods". Governments have long used selective taxation to discourage use of alcohol and cigarettes, while food and clothing remain tax-free. Greens would continue this tradition with selective "eco-sin taxes" to discourage a wide range of grey products and lifestyles. At the same time, taxes would be eliminated on green products and lifestyles. People should be able to avoid taxation by choosing green products and lifestyles.

2) Taxes should be designed to conserve resources and energy. Rather than taxing jobs and profits, taxes should be moved to resource use and energy consumption to reward conservation. The community should benefit from the use of commonly held resources. Using resources is a privilege, not a right, and the user should pay for the privilege. Resources also belong to future generations and to other species.

3) Taxes should be designed to increase employment. Moving taxes onto resources and land use and off of incomes will make people less expensive to employ. Green products, which tend to use less resources and energy and are designed to be reusable and repairable, will not be taxed. This will encourage more employment since green products tend to be more labour-intensive. As energy costs rise, the price of labour becomes more economical, and green products which tend to encourage value-added processes, will provide more high quality, skilled jobs than resource intensive products.

4) Distributive taxes are preferable to re-distributive taxes. By moving taxes off of consumption and on to resource use and land, the poor will be taxed less, thus requiring less redistribution of wealth. Taxing land, not the use of land, will reduce taxation on higher density housing. This will reduce the costs of building high-density housing and increase the amount of available affordable housing.

5) Resource taxes should be applied as early as possible. Resources should be taxed before entering the manufacturing process in order to green all aspects of the manufacturing process from extraction to the finished product. Increasing taxes on resource and energy use will encourage resource and energy efficiency, innovation, reuse, repair, recycling, and used material recovery.

6) Taxing unearned income is preferable to taxing earned income. The tax shift to resource use and community-generated land values will distribute income more fairly without dependence on income and business taxation to redistribute income. Taxing unearned income (resources, land) and not earned income (jobs, profits) will reduce the rich-poor gap since the rich are always in a better position to capture unearned or windfall income by their ability to hold assets that they do not have to consume.

7) Green tax shifting is revenue-neutral, not a tax break or tax grab. The taxes paid by businesses and individuals collectively will not change, but greener businesses and consumers will reduce their taxes. Grey businesses and consumers will pay higher taxes. Studies have shown that 50% of businesses and consumers will be unaffected or only slightly affected by tax shifting, roughly one quarter will realize tax reductions one quarter will be taxed more.

8) Resource use and community-generated land value taxation are fairer. Resource use and land taxes are much simpler to collect and harder to evade than taxes on income and business profits. Since there are far fewer points of taxation than with traditional tax sources, a move to resource use and land taxation will reduce the size of the underground economy. The difficulty of evading these taxes will reduce the problem of overseas tax havens.

9) Green taxation increases international competitiveness. Eliminating taxes on domestic labour will reduce labour costs in Ontario and therefore reduce out-sourcing by businesses seeking cheap labour in other countries or provinces.

10) Pay for what you take, not for what you make. Businesses should not be taxed for hiring people or for earning a profit, but should be charged for using resources and polluting the planet. People should not be taxed for earning an income or purchasing products but should be charged for the value of land they own and the resources used in the products they buy. Resource use and polluting are privileges not rights, and businesses and consumers should pay for these privileges.

11) Taxing community-generated land values is beneficial. Since the value of land is created by the community around it, not by its owner; therefore, the community should receive the benefits it has created. The owner is entitled to a fair profit but not to a windfall profit that rightfully belongs to the community that generated the wealth in the first place. Under LVT the specific use of the land will not be taxed, only the land itself, within the existing zoning. Community-generated land value taxation encourages the efficient use of land, reduces sprawl, reduces speculation, tends to reduce land prices and improves land use patterns.

12) Taxes should encourage local, sustainable, value-added production over imports. Culturally unique products and services will be valued by green tax reform over mass production. The sale price should include the true costs of products, services and distances traveled, and should be designed to encourage local, sustainable production.