Written by Sustainable Prosperity & released through the Metcalf Foundation Green Prosperity Papers

Ontarians benefit enormously from our natural environment. Healthy ecosystems provide us with many environmental goods (clean air, clean water, and timber) and environmental services (floodwater absorption, climate moderation, and pleasant scenery). However, growing cities, industries, farms, and other economic activities are eroding our natural environment’s ability to provide these critical environmental goods and services. These economic activities impose environmental costs on our society that are not factored into the prices we see in markets.

Municipal policy-makers have tools at their disposal to change prices in ways that help to reflect these environmental costs. These market-based policies — like environmental fees, taxes, or market-based instruments— use prices to provide an incentive to minimize environmental harm and to conserve environmental goods and services. At the same time, these policies have the benefit of creating revenue streams for municipalities and encouraging innovation on the part of those paying the fees.

Unfortunately, Canada makes less use of these environmental pricing tools than almost any other OECD country. In this paper, we look at the opportunities to make greater use of these price-based policy tools, particularly at the local level, to help address environmental problems and provide revenue that municipalities need to support their budgetary and environmental objectives.

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