Energy efficiency programs earn governments more tax revenue: federal study

OTTAWA – A new report says provinces that promote energy efficiency may forfeit some tax revenue from lower sales of fuel and electricity, but will make up for the loss — and more — through competitive economies that help fill their treasuries.

Natural Resources ordered the May 2012 study partly to allay concerns in four eastern Canadian provinces that energy efficiency may be good for the environment and consumers but hard on their bottom lines.

“The economic benefits exceed the cost of implementing efficiency measures, and … efficiency investments quickly pay for themselves through increased economic activity and job creation,” says the report.

“The analysis shows that the benefits are greater than commonly recognized even by program administrators and proponents, since expanding the assessment beyond traditional benefit/cost tests introduces the impressive impact to the wider economy.”

The findings mean provinces now have “significant incentive to move beyond current investment levels” in energy-efficiency programs, the authors argue.

The $34,000 report was commissioned from Ottawa-based Environment Northeast, a non-profit research and advocacy group that promotes sustainable economies.

The study closely examined the impact energy-efficiency programs would have in Quebec, New Brunswick, Nova Scotia and Prince Edward Island, all of whom financially supported the analysis.

The report focuses on efficiency savings for electricity, natural gas and liquid fossil fuels, such as gasoline. The three Maritime provinces are relatively energy poor, although Quebec has substantial hydroelectric resources.

The authors examined various levels of efficiency investments in each province, and considered the economic effect if all provinces acted in concert.

“In all cases, the all-fuels and simultaneous, multi-province action resulted in greater economic benefits to a province or the region, due to increased regional competitiveness, intra-provincial trade and other synergistic effects.”

From now until 2040, for example, the Eastern Canada region would see a 14 per cent increase in GDP, and a 12 per cent increase in employment, if all four provinces acted together in implementing so-called mid-range levels of energy efficiencies, the report says.

The net gain in government revenues over the same period, accounting for sales-tax losses for fuel and electricity, would be $243 million in Quebec, $27 million in Nova Scotia, $9 million in New Brunswick and $2 million in P.E.I. The federal government would reap another $312 million.

A senior adviser at the Pembina Institute, a Calgary-based non-profit think-tank focused on sustainable energy, says the study’s tax-revenue findings in Eastern Canada have been replicated for other jurisdictions, such as British Columbia.

“The Maritimes and Eastern Canada are not unique,” Jesse Row said in an interview. “We’ve seen this in a lot of different jurisdictions.”

Row said cash-strapped provincial governments can sometimes be reluctant to put money into energy efficiency without realizing such programs can result in net gains in tax revenue, that can then fund other areas such as health care.

A recent energy-efficiency program was ecoEnergy Retrofit-Homes, a federal initiative the Harper government abruptly closed without notice on Jan. 28 this year to avoid exceeding its $400-million budget.

Natural Resources says the 250,000 homeowners who accessed the program in its final year generated some $4 billion of economic activity. The program subsidized home-insulation renovations.