" (Stephenson, 2006) III. ENVIRONMENTAL POLICY REVIEW

In the work of Ross McKitrick entitled: "Towards the Use of Emission Taxes in Canada" a paper presented to the Finance Committee Round Table on Green Taxes in Ottawa, Canada on May 31, 2001, it is stated that in the presentation of the paper covered are:."..three topics: the context (international and domestic) for environmental policy in Canada, the basic principles of pollution tax design, and the priority I would suggest for proceeding with this policy instrument." (McKitrick, 2001)

McKitrick states that "the theory of optimal environmental taxation was worked out by Agnar Sandmo in an article in the Swedish Journal of Economics in 1975. Some points that have emerged from Sandmo's work are the following:

There is an "optimal" level of taxation on commodities, including those which generate pollution: The optimal level of taxation is determined by the government's overall revenue needs, the market characteristics of each commodity, and the externalities generated by the commodity. The observation that a commodity generates pollution only justifies an additional "green" tax if the current tax rate is below the optimum."

The optimal tax rate is the sum of the revenue-raising portion and an extra charge associated with Marginal Damages.: "Marginal Damages" represents the total amount that people who are fully-informed about the effects of the pollution would be willing to pay to reduce emissions by one unit, if they had the option to go into a market and buy such emission reductions."

Pollution taxes should be considered primarily for their environmental effects, not for their revenue potential: The need to raise revenue does not, on its own, justify introducing "green taxes," nor would the need to reduce the overall tax burden justify a reduction in green taxes."

Pollution tax rates interact with the overall burden of the tax system in a paradoxical way: The heavier the economic burden of the general tax system, the lower pollution taxes should be. Likewise, the less the overall burden of the tax system, the greater the rate at which pollution should be taxed."

The key step in implementing emission charges in a systematic way is to obtain estimates of Marginal Damages: Without these you are merely playing guessing games with environmental policy. Marginal damages estimation is common in the U.S., and some of the leading experts in the field in North America are Canadians." (McKitrick, 2001)

McKitrick also states: "Our urban areas have continuing air quality issues due to the rapid rise in motor vehicle use and the preference for larger SUV-type vehicles. Some commonly-heard suggestions are not useful in this regard: (1) Ontario's "Drive-Clean" emission testing program ("Air Care" in BC) costs a lot and has no measurable benefits. Few vehicles are affected, the tune-ups are minimal and have temporary effect, the program does not affect one's choice of vehicle at the time of purchase nor does it influence the propensity to drive rather than walk or take public transit; (2) Taxes on new "gas guzzlers" do not induce a shift in buyer preference towards new compact cars. They induce a shift towards used gas guzzlers; and (3) Costly emission technology requirements on new vehicles reduce the relative cost of used vehicles and encourage people to keep older vehicles on the road longer. Since older vehicles are "dirtier" these effects undermine the intent of the policy." (2001)

The following chart labeled Figure 1 displays the increase of emissions along with increase in economic growth witnessed in the United States Air Pollution Emissions during the period of 1947 to 1997 of which McKitrick speaks:

Comparison over Time of U.S. Air Pollution Emissions vs. Economic Growth during the period of 1947-1997.

All values indexed to start at 1947=100

Source: McKitrick (2001)

Stated in the executive summary of the document entitled: "Vehicle Emissions Testing: AirCare, Drive Clean and the Potential of Inspection and Maintenance Programs in Canada" and published in the Critical Issues Bulletin in September, 1998 is stated that: "I/M programs were developed...

In spite of the fact that in the United States, I/M programs have never been shown to provide anywhere near the benefits its supporters promised, the programs continue to be very popular with industry, government bureaucrats, and non-profit organizations." (Coninx, 1998)
Coninx states as well that: "program in Canada. AirCare administration is now in the process of designing AirCare II to replace the original Air-Care program when the testing contract expires in 1999. Although I/M programs fall within provincial jurisdiction, Environment Canada has been promoting I/M for 10 years and has developed an I/M Code of Practice through the Canadian Council of Ministers of the Environment (CCME). Ontario had originally announced that it would introduce its first I/M program during 1998, but the launch of the program has since been postponed. The fact that I/M is popular with governments and has powerful friends in the private sector, and that it is paid for (and usually tolerated by) individual citizens has allowed it to escape both organized opposition and the scrutiny appropriate for government programs. Questioning I/M programs may incorrectly be considered tantamount to questioning the value of cleaner air." (1998)

The following table labeled Figure 2 displays the costs for AirCare to consumers in the Vancouver area between the years of 1993 and 1997.

Cost of AirCare to Consumers in the Vancouver Area (1993-1997)

Source: Coninx (1998)

Implementation of I/M program in the country of Canada was based on the."..alleged need to reduce urban ground-level ozone which is a major component of photochemical smog. Ozone is produced when VOCs mix with NOx, to build up over a period of days. Moving air masses can transport ozone or its precursors from one region to another. In southern Ontario, for example, over one-half of the ozone or ozone precursors originate in the United States (CCME 1997: 258; as cited by Coninx, 1998)

It is revealed that an American consulting firm by the name of 'Radian' a firm that specializes in I/M programs was hired for the purpose of auditing the AirCare program in their third year of operation and that Radian produced."..a glowing report which was released to the public in April 1994 (Weyn and Klausmeier, 1994) Even though AirCare had shortened the test procedure and identified less than one-half the expected number of vehicles having excess emissions, and though 18% of the identified vehicles could not be sufficiently repaired to pass another test and had to be issued waivers, 18 the "audit" still claimed that AirCare was close to achieving the targets that it had been designed to achieve; the NOx reduction target had been conveniently reduced from its original 20% to 3% for the audit. The conclusions in the Radian audit are based on test scores of only 79 vehicles. No confidence intervals or other indications of statistical significance were given for any of the results. Emission reductions were calculated using U.S. EPA's unproved and controversial MOBILE 5A computer model. This model so greatly overestimated the poor condition of vehicles in British Columbia that the vehicle emissions predicted by the model after the I/M testing and repairs had been performed were greater than the actual emissions from vehicles before they took part in the program (Weyn and Klausmeier 1994: 2-10; as cited by Coninx, 1998

Coninx reveals that even the Manager of Emissions for the AirCare program had to admit that the audit was not "...purely scientific..." And was inclusive of "...leaps of faith..." (Coninx, 1998) Furthermore, the analysis conducted by Radian contained "...a number of unsupported assumptions and other methodological flaws..." (Coninx, 1998) stated to be those as follows: "(1) The assumption that hundreds of tonnes of evaporative emissions were reduced although no evaporative tests were being performed by AirCare; (2) The assumption that "super-emitters" (that produce 20 times the certification level of CO and VOCs) were identified and repaired, even though there was no evidence of their existence,21 let alone their repair; (3) The failure to consider the annual distance traveled by vehicles, especially vehicles of different model years; (4) The artificial segregation of test scores according to type of failure, which concealed increases in emissions caused by AirCare repairs; (5) The assumption that there is no cheating on the part of motorists and mechanics and that there will be no deterioration of the vehicle until the next test (the "Clean for a Day" phenomenon); (6) The exploitation of a statistical quirk that produces apparent benefits from the random variability of the vehicle and the test. Combined, all of these analytical defects tend to overstate the emission reduction benefits from AirCare. For example, the assumption that evaporative emissions were reduced creates a fictitious reduction of 840 tonnes of VOCs (Weyn and Klausmeier 1994: 2-12) and the assumption that "super-emitters" were identified and repaired supplied another fictitious reduction of 660 tonnes (Coninx1996b: 18-26). Therefore, 1500 tonnes of the reduction in VOCs -- over 30% of the total claimed reduction of 4,740 tonnes -- was based solely on two "assumptions" with no evidence to support…