The election of Stephane Dion to the leadership of the federal Liberal party creates perfect conditions for the introduction of a national personal carbon trading system. (See sidebar for a brief description). Dion is said by many observers to have won at the Montreal convention on his strong environmental record while he was in the cabinet as environment minister in the last Liberal government. He is weak in Quebec because of his strong federalist stand, and analysts say he can only strengthen his showing there—an absolute precondition to winning a national election—by emphasizing his environmental agenda. He has raised expectations across the country by speaking out strongly in favour of renewing Canada’s Kyoto Accord commitments to reduce greenhouse gas emissions. And in any campaign against the Conservative regime of Stephen Harper, it is, say many observers, only on the environmental file where the Conservatives are so weak and the Dion Liberals so strong as to make the environment his obvious election issue.

At his first press conference following his election as leader of the Liberals, Dion strongly emphasized his commitment to three overriding principles: economic sustainability, social justice, and environmental improvement. When he was environment minister, Dion introduced a tax-incentive plan to encourage companies to make changes to their emissions. But tax policies in general will not win Dion much support in Western Canada, where he is also seen as weak, and will open him up to charges of creating policies that are not economically sustainable. Nor will new spending on social programs make him any friends in the powerful business lobby, putting a crimp in his stated commitments to social justice as well. And on the third leg of his platform, environmental improvement, he will have a hard time convincing Green and NDP voters that a few tax incentives to companies can make any useful overall reduction to Canada’s greenhouse gas emissions, which climbed 34% during his tenure at that ministry.

This is why Dion and his advisors should be alerted immediately to the special qualities offered by a national personal carbon trading system. First, it involves no taxes. Aside from capping the total number of permits to buy gasoline issued in the country, and distributing them out equally to all adults, the government would have little involvement in the scheme, whose day-to-day mechanisms would be operated entirely by market forces.

Second, the scheme comes with a built-in progressive social benefit at no cost to the government, and involving no taxes or spending. We can generally assume that poorer people use smaller cars, or no car at all, and buy less gasoline than richer people. If the average consumption of gasoline among adults is about 2,000 litres annually, and if the scheme begins year one by allotting 1,900 permits to each person (thereby ensuring Canada as a whole burns 5% less fuel), it is safe to assume that a poorer Canadian will have excess permits and a richer Canadian, being an over-average consumer, will need to buy more permits to carry on living in the way to which he is accustomed. That means that wealthy drivers will pay poorer non-car owners for their permits. Without any tax to administer or payments to hand out, a personal carbon trading system like this can become, as a side benefit, one of the most effective wealth redistribution schemes in the nation’s history, at nearly no cost to government, using no bureaucracy, and involving no taxes.

Finally, the personal carbon trading system, borrowing as it does from already proven cap-and-trade systems in various industries in countries around the world, promises to be a truly effective means of actually reducing the real quantity of national greenhouse gas emissions, and it does so without laws, penalties, inspections, fines, or any other onerous act of government regulation, surveillance, or monitoring.

The scheme will cost about half the population more money (if they keep to their present driving habits), making it potentially unsellable politically, but it also will pay the other half of the population extra money, making it a wash when it comes to personal economics. But the political scales would be tipped heavily in favour of adopting the scheme when Canadians understand how well the scheme will reduce the national production of greenhouse gas emissions, at virtually no government cost. There are good arguments against the scheme, but none that threaten to kill it. Naturally, there will be cheaters and also those who will go across the border to buy gas in the US without permits. But we already accommodate this problem: there are already those who avoid paying gas taxes by buying cheaper tax-free gas in the US, thereby avoiding paying their fair share of funds used to maintain the roads they themselves use. No system is immune to cheaters, but cheats seldom cause enough hardship to justify abandoning a system. There are those who cheat on their property taxes too, but no one suggests therefore that the cities should abandon the property tax system.

Another problem occurs in the case of those people who by some justified necessity or other, due to business or because they suffer a handicap, need to use more gasoline than the average person. Should they have to spend more on permits too? Of course the answer is no. For example, a fire department or a police department should not have to buy permits at the same market price that individuals are paying. This problem is easily resolved, though, simply by allowing such organizations or businesses to write-off some portion of their purchases of permits in their annual tax returns. That way, the integrity of the nationally capped quantity of greenhouse gas emissions from the burning of gasoline is strictly maintained without forcing necessary users of extra gasoline to suffer budgetary pain.

Finally, some may raise a concern about how the whole scheme can be set up. The answer is easy: using common debit style data cards and existing card-swipe terminals already found at all gas stations, permits can easily be stored on cards and can easily be bought and sold at any gas station. It is even possible for gas stations to have displays showing the minute-by-minute market price of permits, allowing people to choose to buy or sell permits on the spot, based on their own personal choices. The whole system already has most of its infrastructure in place; it merely requires some software code.

If the national personal carbon trading system is successfully implemented across Canada, we could then in the future expand upon it to include all household energy purchases, like gas and electricity for the home, and all business purchases of energy too. With this scheme it is conceivable we can lower our use of gasoline by 5% over the course of one year. That is, after all, just a few less trips in the car per year. The following year, it would be the same thing, a few choices about using the car less, always with the incentive of conserving permits that can be sold for cash on the market. After ten years of relatively easy 5% annual reductions in our average use of gasoline, this country will have achieved an astonishing 40% reduction in our total consumption.

There is another huge side benefit to this scheme. At current prices, Canadians spend about $40 billion annually on gasoline. Over the first ten years of this scheme, even if gasoline prices stay the same, we would divert a total of $96 billion away from big oil companies, and into personal savings, local small business shopping, or whatever—anyplace that that money lands is surely better for the Canadian economy than leaving the country in the coffers of global oil companies.

If we assume that gasoline prices will rise 10% annually, and that, in the absence of any effective national conservation program, a growing Canadian population using more gasoline each year might add 3% annually to our rate of consumption, this scheme would divert, over ten years, a staggering $256 billion away from fuel purchases, and toward anything else Canadians want to do with their money. That huge economic effect alone should be enough to earn support for the scheme from every big business and banking association in the country, not to mention every small business too. Even the car dealers will get behind the scheme, since there will be such a huge demand for new, more gas-efficient cars that help people save permits they would rather sell.

It’s a scheme new Liberal leader Stephane Dion should champion for the country. It’s economically sustainable, it serves ideals of social justice, and it effectively reduces Canada’s greenhouse gas emissions, all with no new laws, no new regulations, no new taxes, and no new spending. Even the Fraser Institute would back Dion on it: the scheme unleashes the powers of the free market.

You decide how much it's worth to you: