Recommendations for Budget 2005
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Toxic Substances Tax

Recommendation
Create a dedicated tax on chemical substances listed as Toxic Substances under the Canadian Environmental Protection Act (CEPA) in order to make Canada’s premier anti-pollution law work.

Revenue
Revenue from the tax, estimated at $170 million per year, will be used to build the capacity of the federal government to “make CEPA work”. Revenue will be used to measure, monitor and understand the presence of toxics in our environment, and sustain research on better ways to prevent pollution with a new focus on reducing toxics throughout the complete product life cycle.

Benefits for Canadians

• promote pollution prevention
• contribute to protection of human health
• reduce public health costs
• create employment in research, development and implementation of better emission control and best industrial practices
• lower the cost to government, communities, and industry of expensive cleanup and remediation, and lost ecological services such as water quality

The capacity of the federal government to deliver its toxic substance control mandate as required by law is in a deficit situation and continues to decline. Incredibly, an Environment Canada internal operational assessment of CEPA admits that if current levels of funding remain unchanged, it will be 25 years before all substances on the Domestic Substances List are screened for persistence, bioaccumulation and toxicity (Canadian Environmental Protection Act, 1999 (CEPA 1999) Health Canada — Safe Environment Programme Operational Review. October 2002). In other words, it will be a full generation before the harmful characteristics of chemicals currently in commerce are understood, let alone new chemicals entering the market.

In order for Canada to get off this “Toxics Treadmill”, the federal government urgently needs an enhanced capacity to measure, understand and take control of actions regarding the presence of toxic chemicals in the environment and in all phases of the life-cycle of consumer products. In accordance with worldwide trends in business and environmental management, the government needs to move its attention “up the pipe” and devote more resources to product life-cycle assessment and management approaches.

Canadian industry continues to generate enormous quantities of toxic substances as waste. Releases and transfers (not including recycling) of substances declared toxic for the purposes of CEPA and reported under the National Pollutant Release Inventory (NPRI) in 2002, include:

• More than 45,766 tonnes of heavy metals;
• 811,701 kilograms of Polyaromatic Hydrocarbons (PAHs);
• 452,181 kilograms of hexachlorobenzene;
• 263.226 g TEQ dioxins and furans; and
• 39,960 tonnes of CEPA toxic substances.

• 953,721 tonnes of carbon monoxide;
• 576,739 tonnes of nitrogen oxides;
• 61,150 tonnes of PM2.5;
• 108,889 tonnes of PM10;
• 1,978,934 tonnes of sulphur dioxide;
• 227,900 tonnes of total particulate matter; and
• 267,553 tonnes of volatile organic compounds.

Mining operations are not required to report releases and transfers of toxic substances under the NPRI. As a result, releases and transfers
of CEPA toxic substances from mining operations are not included in these estimates. The exemptions from reporting for the coal and metal mining sectors were lifted from the US Toxics Release Inventory (TRI) beginning in 1998. As a result, the metal mining sector in the US emerged as the largest source of total on- and off-site disposal and other releases of TRI substances, constituting 27 per cent of all releases reported to the TRI in 2002.

Pollution Taxes in Other Jurisdictions
Other countries have successfully used pollution tax measures to reduce toxic emissions. For instance, the US Superfund Polluter Pays Taxes included:

• A crude oil tax (9.7 cents per barrel tax on purchase);
• A chemical feedstock tax on the purchase of 42 toxic chemicals ranging from $0.22 to $10.13 per ton;
• A Toxic Chemicals Importation tax on the importation of 113 dangerous products made from chemicals covered by the feedstock tax; and
• A Corporate environmental income tax on the profits of large corporations (rate of 0.12 per cent on taxable profits in excess of $2 million; $12 per $10,000).

In addition, many U.S. states, including Delaware, Massachusetts, New Jersey and Rhode Island now tax various toxic substances to fund pollution prevention programs and the remediation of contaminated sites.

Recommendation
Establish an excise tax on the release and transfer of toxic pollutants designated under CEPA. The tax should also be applied to criteria air contaminants that have been added to the CEPA list of toxic substances, including nitrogen oxides, PM2.5 and PM10, and volatile organic compounds. The tax should be weighted based on the level of toxicity for each substance.

The tax will create an incentive to reduce the use, generation or release of the specific pollutants. The net result is an incentive for pollution prevention on a much wider basis than the federal government currently regulates.

The toxic tax would be calculated from a base tax of $100 per tonne for substances listed as toxic by CEPA. For illustrative purposes, the tax is applied according to the classifications of substances for the purposes of NPRI reporting thresholds, which provides a rough indication of their toxicity and policy priority.

The thresholds and rates upon which potential revenues are calculated are in the table below.

These calculations are for illustrative purposes, to indicate a potential weighted approach to the application of the tax. Tax rates could be varied to reflect the level of priority assigned to different types of substances, and to ensure impacts on the users of substances that are sufficient to modify behaviour.

Revenue from the tax ought to be used for the following activities:

• program administration/enforcement
• implementation of CEPA, in particular CEPA Part V, including the Domestic Substances List screening process for Persistence, Bioaccumulation and Toxicity characteristics and subsequent toxic substance management measures
• measure, monitor and understand the presence of toxics in our environment
• pollution Prevention Research Fund with a focus on product life cycle
  The government should also review and remove the exemptions for the mining sector from reporting to the National Pollutant Release Inventory. Given the scale of the potential contributions to releases and transfers of hazardous pollutants, criteria air contaminants and greenhouse gases, the exemption for the mining sector constitutes a major gap in the NPRI reporting structure — particularly with respect to on-site land releases, which may ultimately result in water pollution.

Alternative and Complementary Policies
The federal government maintains that it is committed to safeguarding Canadians from toxics through pollution prevention. However, regulatory action has yet to be taken in connection with most substances declared toxic under CEPA. The government needs to enhance its capacity to regulate where appropriate and to take complementary action where other non-regulatory approaches are warranted.

Contact
Rick Smith
Environmental Defence
416-323-9521 ext.225

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