As part of our 2008 federal election coverage, Investment Executive explores the positions of the major federal political parties on the top issues affecting the financial services industry.

Here we look at where the parties stand on the environmental policy.

Canadians want decisive environmental action. They just don’t want to pay for it, says Peter Donolo, director of communications for the Strategic Counsel, an election polling service.

The Strategic Counsel found that 15% of Canadians rated the environment as the second-most important issue in this election, next only to the economy, in a Sept. 1 report to CTV and the Globe & Mail. However, when asked about paying more taxes for a greener country, Donolo says voters were quick to pass the buck: “There’s some price sensitivity in terms of what they’re willing to put up. People will tend to say, ‘It’s the corporation’s responsibility’ or ‘It’s the government’s responsibility’.”

In aiming to win over Canadians, parties took these insights to heart and the Green Shift bandwagon platform was born. Under the Liberals’ Green Shift plan, polluting corporations pay and individuals gain. Companies would get charged between $10 and $40 per tonne of carbon and greenhouse emissions they produce over the next four years. The revenue will then paid back to households in the form of lower tax rates and more credits.

This would mean a family with an income of $74,000 and two children would receive almost $1,400 back during tax rebate time.

Similarly, the Green Party proposes a “polluter pays” tax, which includes a carbon tax on fossil fuels, making them more expensive to process and use.

But the rising price at the pump would be balanced out with lower income taxes and rebates for using green products, according to the party’s platform. Voters with low incomes, who live in rural areas, will also be eligible for additional credits.

The timing of these green promises, however, couldn’t be more off, says Donolo: “They came out with this just as the economy has started to dip. It’s not clear to people how some taxes are going to go up and others down. Elections are very difficult times to explain complex tax policy, especially if you want to change it.”

The thought of a green government has British Columbians especially worried as individuals in the province already pay an extra carbon tax. As such, Liberal support has plummeted in six of the 10 ridings they won in the last election.

“I don’t think it’s a coincidence that there is a controversial green tax already in place,” Donolo says. “The economy trumps the environment now in terms of people’s concerns.”

Showing Canadians the tradeoff between economic and environmental stability is what Prime Minister Stephen Harper is banking on, says Donolo: “He’s trying to play off one thing on the other” and says that the environmental actions proposed by the other parties are “going to cost an unreasonable amount, economically.”

Playing it safe, the Conservative platform has done away with any eco-tax shift altogether. If elected, the current governing party plans to stick with its original environmental initiatives, says a Conservative Party spokesperson in Ottawa.

The plan includes more stringent targets for companies’ greenhouse emissions as well as a $2 billion ecoENERGY initiative, which includes consumer rebates for fuel-efficient vehicles and grants for businesses to upgrade to more pollution-saving devices.

The Conservatives propose that these efforts will bring emissions down by 20% by 2020. They also aim to cut air pollution in half by 2015.

The Tories would also plan to maintain their $1.5-billion fund devoted to climate change and clean air.

Taking action on climate change is crucial for any party aiming to keep the property and casualty insurance industry healthy, says Dennis Prouse, government relations director for the Insurance Bureau of Canada.

Prouse says that with rain and snow breaking record levels more frequently in the past few years, the industry has noticed that its claims payouts are increasing significantly.

“We’ve been talking to all three levels of government about climate change adaptation, not just greenhouse gases, but how are we going to adapt to the weather changes that are coming,” he says

For instance, more funding needs to go toward improving municipality sewage and water systems to cope with the alarming rate at which precipitation levels are rising, Prouse says.

@page_break@“I’m not talking about a little bit of rain and snow here,” he adds. “I’m talking about two-hour heavy downpours that some older sewage systems cannot handle.”

While the feds do give the provinces some money to these particular improvements, it’s just not enough, Prouse says: “Part of the problem is at the local level; the definition of infrastructure gets expanded far beyond sewage and water. All of sudden, that funding goes to building new roads and recreation centres as opposed to doing what it was supposed to.”

And without specific guidelines for infrastructure spending, public and private property will be at greater risk for water damage, which, in turn, will lead to higher claims payouts, Prouse says.

“Talking about adaptation is important so we can keep playing the role we always have,” says Prouse. “We are the oxygen of the economy … you never know we’re there, but people need insurance to keep running their businesses.”

The Green Party speaks to this specific need with its proposed Climate Change Adaptation Fund. Using revenue from pollution taxes, the party would then be able to fund special task forces across Canada to manage this issue.

The task forces will be made up of all levels of government and set up in regions most vulnerable to climate change, such as the Canadian Artic, the Prairies and interior of British Columbia.

Overall, the Green Party aims to cut greenhouse gas emissions to 30% below 1990 levels by 2020 and to 80% below 1990 levels by 2050.

The same 2050 goal goes for the New Democratic Party, but it only plans to implement a “cap and trade” system.

Using this model, the NDP will ensure carbon emission falls to 80% of 1990 levels by assigning companies “caps” or permits for the tonnes of emissions they can produce. The “trade” comes in when more eco-efficent firms, below their “cap”, sell their permits to those companies that are less efficient, ensuring the overall target is met.

Revenue generated from the “cap and trade” system will go to support a $750-million green collar job fund and a $1-billion trust for retrofitting homes and buildings.

To raise more capital for green efforts, the NDP would also introduce Canada Environment Action Bonds.

As for a green bond’s return on investment, that will be for Canadians to decide.