5 Questions for Nancy Olewiler: carbon, water, traffic and the cantankerousness of economists
“If you put two economists in a room, you get two opinions, unless one of them is Lord Keynes, in which case you get three.” So said Winston Churchill. So what happens when you put 12 leading economists in a room and ask them to focus on one of the biggest challenges of our time: growing economic and environmental prosperity in Canada? You get Canada’s Ecofiscal Commission. This Commissioner blog series gives you a glimpse into the diverse personalities and perspectives behind our work — and what it takes to wrestle through the big issues together.
- What fascinates you most about the field of economics?
In connection to our work on the Ecofiscal Commission, it’s the role of markets that I think is quite intriguing. So, understanding the way markets work and when they don’t work to exchange goods and services in a way that makes people better off.
- Traditionally carbon emissions are not something that’s taken into account in a free market economy. So how does B.C.’s carbon policy work and what you think has made it successful.
The B.C. carbon tax is a textbook example of what we at the Ecofiscal Commission have been talking about — making markets work for the economy and the environment. Greenhouse gas emissions from the combustion of fossil fuels does not get priced, and we know that that creates all kinds of bad things, in terms of global climate change, local air pollution, et cetera. The B.C. carbon tax taxes the bad, which is the emissions of greenhouse gases. It then takes that revenue and returns it to the economy in the form of a reduction in personal income taxes, a reduction in corporate income taxes and special provisions for people living in rural areas and for low-income folks. Most people are better off because their income tax offsets their increase in the prices of fossil fuels. And we’ve seen that people do respond to higher fuel prices by finding ways to reduce their consumption; the tax helps pave the way for greener energy in our economy.
- Can you point to other examples of how environmental resources are underpriced?
You bet. I live in North Vancouver and we have a flat annual bill for water, which means that I could have a leaky tap, I could wash my car five times a day, I could take 45-minute showers and my total costs would not change. In areas where water is not priced per unit, then consumption ranges from two to four times more than areas where people pay for what they use.
- Transit is one of your areas of expertise. What do you see as some of the best ecofiscal opportunities for dealing with transit challenges?
There are two challenges here, and one is congestion. Congestion is costly for you and me because it takes us longer to get from A to B. It’s very costly for the folks that are driving trucks with your food — that’s a real cost that gets added on to food prices and everything else. With dynamic pricing, you can price the road at points in time to reflect the anticipated congestion. In rush hour, it would be a high price; in off-peak hours the price is less. So people will start using the roads at different times.
But if I don’t have a way to get to work other than in my car, I’m not going to be as responsive to congestion pricing. That’s why we want to take the dollars that we charge people in congestion pricing and use those to provide alternatives like public transit.
- What are the challenges of getting 12 economists across the country to agree on approaches?
Well, the good news about economists is they like to argue, and I’m saying that is good news because it allows you to get different perspectives. But we all share the same values and passions, and I think that’s what makes it work. We care about the environment and we care about the economy.
About the Author
Nancy Olewiler is a Professor at Simon Fraser University in the School of Public Policy, and a former Member of the Technical Committee on Business Taxation, as well as a Commissioner of Canada’s Ecofiscal Commission.