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Use the market to solve energy, environmental, and aboriginal poverty issues, say Manning and Harris

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Release Date: November 27, 2007

TORONTO, ON-Canada should be looking to market-based public policies to deal with a broad array of concerns ranging from environmental issues to energy pricing to aboriginal poverty, Preston Manning and Mike Harris say in a new policy paper released today by independent research organizations The Fraser Institute and the Montreal Economic Institute.

Vision For a Canada Strong and Free is the final summary volume in the Canada Strong and Free series prepared by Manning, former leader of the federal opposition, and Harris, former premier of Ontario. Both men are now senior fellows with The Fraser Institute.

In this book, the two summarize previous policy recommendations and lay out their far-reaching vision for building a stronger, healthier and more prosperous Canada. The foundation for many of their recommendations is an embrace of free market principles along with greater individual responsibility and choice.

"We have yet to fully realize all the benefits a free and open market can provide because of the excessive financial demands and regulatory constraints of oversized and protectionist federal and provincial governments," Manning said.

Manning and Harris suggest that the environment is one area where many Canadians are too quick to call for additional government regulation, rather than relying on having the proper price signals and financial incentives in place.

"Far too many politicians of all stripes think the solution to a problem that appears to be created by business is to propose some new form of regulation," Harris said. "But why can't we look to the market and the appropriate pricing and profit signals to satisfy our demand for cleaner water, air, and energy, and sustainable soil, wildlife, and forests."

Manning and Harris point to the Kyoto Protocol as an example of a typical government response to an environmental issue.

"Regulatory agreements like Kyoto are typically slow to respond to the dynamic market circumstances under which environmental threats occur and change, have high transaction costs, and are frequently oriented more to micromanaging process than to securing positive outcomes," Manning said.

Water is a primary example where Canada could benefit from the application of market principles. At present, public subsidies and the absence of any substantial price constraint encourage individual Canadians to think of water as virtually free; the same is true for industry. The result is gratuitous waste and disincentive for innovations in efficiency that might delay future shortages, Manning and Harris write.

"To send a clear signal of the true value of water to every Canadian dozens of times a day, whenever one of us turns on a tap or a business sticks a pipe into a river, aquifer, or reservoir, there is no substitute for a pricing system based on a full accounting of costs," Harris added.

The two recommend that Canada implement policies requiring universal water metering and progressive volume pricing, based on the full cost of delivery from source and research-based estimates of the cost of ensuring an adequate supply of water into the future.

Manning and Harris also write how market based policies should be applied to Canada's energy sector. They call for deregulation of electricity pricing, allowing prices to be determined by competitive market forces. At the same time, they acknowledge that energy pricing must include the full costs of environmental protection so consumers can make informed choices.

"If we decide that greenhouse-gas emissions should be reduced, then emitters of those gasses must absorb the full cost. The prices of different energy products will have to reflect those costs, creating price incentives for consumers to use the most environmentally-friendly source of energy," Manning said.

On the issue of aboriginal poverty, Manning and Harris write that the reserve system, years of reliance on government funding, and the traditional tribal governance model has stifled individual freedom and repressed personal choice.

"Rather than simply redistributing dollars from federal government coffers to aboriginal reserves, why not strive for a better distribution to aboriginals of the 'Tools of Wealth Creation,'" Manning said. "These would include better access to property rights, capital, markets, information, technology, and education."

Among other things, Manning and Harris recommend encouraging private property ownership on reserves; in particular, home ownership for individuals and families. They also recommend that the $5 billion now sent by government to chiefs and councils be instead distributed directly to First Nation band members with a concurrent provision to allow bands to tax back some of this money to fund their activities.

"We began this series of policy papers as a way to articulate a vision of Canada as a nation whose people could enjoy the highest quality of life in the world; have access to good jobs, high incomes, and quality goods and services provided by the best performing economy in the world; and exercise their freedom in the security of the best-governed democratic federation in the world," Manning said.

"Markets amount to choice. There are clear benefits to be gained from a more assertive application of market-oriented thinking, both in areas in which market-based approaches are well accepted, but could be more rigorously practised, and others where the application of market-based approaches represents a break with conventional thinking. Embracing these principles will help build a Canada Strong and Free."



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