Any developer asking for a permit to build units in Victoriaville, Que., will now have to pay a tax of $25 for every square metre of tree canopy they cut down.

“This canopy charge is a model to follow,” said Marc Bishai, a lawyer at the Centre Québécois du droit de l’environnement (Quebec Centre for Environmental Law). “Several relevant stakeholders have thought through it,” he added.

Those stakeholders include the City of Victoriaville, environmental NGO SNAP Quebec,  public administration school ENAP  and an environmental justice non-profit – Centre québécois du droit de l’environnement. 

Eco-taxation is a tool for the government (federal, provincial, and municipal) to collect funding for climate mitigation—avoiding and reducing emissions—and adaptation—protecting us against climate change, he said.

The eco-fiscal toolbox

Governments have access to three instruments for eco-fiscal purposes, said Fanny Tremblay-Racicot, a professor at l’École Nationale d’Administration Publique (ENAP) and contributor to developing the canopy charge.

The first instrument is taxes. It can dissuade or discourage certain situations, sending a price signal that could encourage behavioural changes or quell harmful practices,” she said.

“Taxing parking areas or vacant spaces are examples of taxes used for eco-fiscal purposes,” said Tremblay-Racicot.

Secondly, the government can impose user fees or taxes in exchange for services.

For example, the City of Beaconsfield, Que., has practiced a “pay as you throw” policy since 2017. All household garbage bins are equipped with RFID transponders that calculate the trash’s weight.

The tax is a fixed proportion paid by all households and a variable amount calculated based on the number of additional garbage bin collections made during the year. The amount appears on the municipal tax bill.

While larger cities, like Ottawa, Calgary and Montreal, considered a similar tax, cities decided the program was too costly, complicated or would upset citizens.

Still, some 132 Canadian cities have implemented a “pay as you throw” tax. Stratford, Ont., is one, and residents produced 35 per cent less garbage and recycled 62 per cent more once they were charged $1.75 per bag of trash.

“Waste pricing can trigger an induced reduction in the amount of waste collected, generating a positive feedback loop by decreasing the expenses and greenhouse gas (GHG) emissions resulting from collecting and processing these materials,” said Tremblay-Racicot. 

Lastly, governments can impose regulatory charges.

“There are two major differences between taxes and regulatory fees. First, the amount collected from a tax can be pooled in a government’s general budget. The regulatory charges can only be allocated to a dedicated fund. Second, a government can only tax what is within its power. But it can apply a regulatory charge to use that is not within its power,” said Tremblay-Racicot.

For instance, in Quebec, public transportation is a provincial responsibility. However, cities can finance their local public transit system by applying regulatory charges, voting for a regulatory regime, and creating a dedicated fund. Many municipalities are presently considering this.

The City of Prévost, in the Laurentian region, used its regulatory powers to charge for single-use containers, such as windshield washer fluid.

The provincial government granted Quebec cities more robust taxation and regulatory powers in 2017.

“In Canada, Toronto and all Manitoba cities, except Winnipeg, were granted enlarged taxation power. Regulatory powers are unique to Quebec,” said Tremblay-Racicot.

She is working with the Federation of Canadian Municipalities to explore how new powers could be distributed to all Canadian municipalities based on what is already possible. 

Among its many uses, eco-taxation can encourage and fund nature-based climate solutions. 

How the canopy charge works

“Nature is the ultimate green technology,” said Jean-Philippe Lemay, a lawyer for environmental NGO SNAP Quebec.

He added that nature-based climate solutions improve our ability to capture and store GHGs through targeted interventions that range from conserving intact environments to better-managing ecosystems subjected to human use.

Victoriaville’s canopy charge funds a nature-based climate solution.

Its dual objective is reducing canopy loss during construction projects and collecting revenues to raise the canopy’s coverage. 

“Even if all promoters plant a few new trees to compensate for the ones they cut, the ecosystemic value from a mature tree is significantly higher than a new tree’s. Shade coverage and carbon capture are not optimal with new trees,” said Lemay.

Even in the unlikely event that all tree-cutting stops on their territory, all Canadian cities still need to raise their canopy coverage. 

“According to science, urban canopy should be 40 per cent. In Victoriaville, it is nearly half of it at 22 per cent,” said Catherine Ouellet, director of finance for the City of Victoriaville.

The amount collected from the developers deploying the project in Victoriaville will go toward a fund created for greening purposes. All regulatory charges must be directed to a fund solely designed for that purpose.

Finding the right price

There was much discussion before implementing the canopy charge and deciding its amount. The multi-stakeholder working group initially tried to use an amount with an environmental value or even based on the cost of replanting, said Ouellet. 

However, the values would have been too high.

“It would have cost more than $200 per square metre. Social acceptability would have been difficult to obtain,” she added.

It’s difficult to predict the public’s reaction to eco-taxation, said Tremblay-Racicot.

“Sherbrooke’s pool tax sparked a melodrama that lasted several weeks. The tax on parking spaces in Quebec City was like butter in the frying pan,” she added.

Another challenge is the bouncing effect. “You do not want to solve a problem by creating another one,” said Ouellet.

Thus, the working group tried to imagine what amount would have a dissuasive effect without preventing real estate development.

 “It’s a delicate balance,” she added.

The Victoriaville government knows the balancing effect between solving the housing crisis and addressing climate change. For example, the construction of 300 units on the site of a former sandpit is causing quite a stir.

The site adjoins a vast green space and a river, a rare refuge for wildlife in this ultra-agricultural region. Moreover, a citizens’ group argues that the sand pit acts as a buffer zone between these ecosystems, tempering the impact of human activity on these environments.

Covering all the angles

Bishai said any eco-fiscal measure, be it a tax, tariff, or regulatory charge, must consider three aspects.

It should be legally valid. 

It needs to be politically accepted. “It includes the acceptance by the politicians and the population,” he added.

It should be effective on the ground. The measure must fulfill its objective, meaning reasonable pricing to cover the cost of the service or good pricing to influence behaviour.

Follow-up is key to effectiveness. “If it was meant to be a price signal: has behaviour changed? If the main purpose was to raise money, how is the money collected being used?” said Bishai.

Planning  the next step

Iteration and additionality are the pillars of eco-taxation. Although many eco-taxes target both behaviour change and revenue collection, the impact mix may differ from one measure to the other.

Ouellet said the $25 canopy charge will probably impact developers’ behaviour more than the City’s revenues. Thus, phase 2 is already being rolled out.

The charge on developers should help preserve the existing canopy by influencing them to cut fewer trees on their projects. 

However, to reach its 30 per cent canopy coverage objective, Victoriaville needs to add new trees, said Lemay. 

Thus, phase two provides for a charge based on the proportion of canopy in a yard. The owner would pay the fee if this proportion is below 20 per cent. Lemay explained that he will receive a tax deduction if it is above 20 per cent.

However, timing will be critical for acceptance and the efficiency of this second phase.

“For now, the City will add $15 to the municipal taxes of all citizens to finance canopy addition. We call it a tariff,” said Ouellet.

This tariff will eventually evolve into an eco-fiscality measure paid according to the canopy percentage in the citizen’s yard.

“Canopy is measured with satellite; trees need to be over three meters to be considered. We need to give citizens time to plant trees before changing the tariff into an eco-fiscal measure,” said Ouellet.

The limit: data collection

Victoriaville has a geomatic team. The City invested in professionals and tools to map its territory.

“A city needs satellite data to identify its canopy coverage and determine the canopy loss associated with a real project. We need the information when promoters apply for a permit in real time. You need experts in your team or access to experts. Otherwise, manual data collection is much too costly,” said Lemay.

Although satellite data collection is the most effective way to map a territory, it is imperfect. In Sherbrooke, a citizen received a $80 pool tax bill for its pond, but the satellite did not see the difference.

So, Victoriaville gave neighbouring municipalities access to its expertise, signing an agreement with the regional government to offer the services of its geomatics team.

Data collection is a significant challenge to implementing relevant eco-fiscal measures.

“Most municipalities don’t have sufficient information on the situation of their riparian buffer strips, for example. Last summer, SNAP Quebec sent students to the field to carry out inventories. Satellite tracking would have been more effective, but they do not have the budget,” said Lemay.

While sharing geomatic expertise is a solution, accessing existing provincial and federal data is another.

What to expect: the next wave of eco-fiscal measures

Environment and Climate Change Canada financed the development of the canopy charge as part of a major initiative to explore the possibilities for Canadian municipal eco-fiscality.

At least two other Quebec cities, Nicolet and Varennes, participated in this pilot project to develop eco-fiscal measures to fund nature-based climate solutions. Tremblay-Racicot said other cities have also indicated interest.

Outside the federal program, other Quebec cities are experimenting with eco-fiscality for nature-based climate solutions. Laval administration’s regulatory charge on agricultural land left fallow is a good example.

Almost a third of the surface area of this City of 450,000 inhabitants is farmland. However, barely half of this land is cultivated, as owners wait for rezoning and real estate projects before selling their land.

Laval hopes to raise $1.1 million annually with this regulatory charge. The money will be transferred to the newly created Fonds de remise en culture, acquiring fallow land and bringing it back into cultivation.

Lemay says nature-based climate solutions for agriculture have great potential. The IPCC’s super solutions list carbon sequestration through agriculture as much more effective and less costly than technological carbon capture.

The last word

“One of the most effective eco-tax measures for nature-based climate solutions is the one that doesn’t make any money because it means that citizens haven’t touched nature,” concluded Lemay.

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