B.C.’s Prized Carbon Tax: A Primer

B.C.’s carbon tax has been called both elegant and a template for the rest of the world. Because it increases taxes on things we don’t want (emissions), reduces taxes on things we do want (income), is popular with the public and has actually worked to reduce the province’s carbon footprint, it’s been called a win-win-win-win.

So how does it work?

Pretty simply: if you burn fossil fuels (oil, gasoline, natural gas, etc.), you pay the tax. British Columbians see the tax on their heating bills and at the pump when they fill up their cars. But because the system is designed to be revenue neutral, British Columbians also see the benefits of the tax feeding back into the system, benefiting consumers through tax credits and breaks.

Every dollar collected by the government through the tax (approximately $1 billion annually) is funnelled back to the people of B.C.

The system also has the highest price on carbon pollution: $30 per tonne — although B.C. got there gradually growing from $10 per tonne in 2008 to $30 in 2012.

As in Quebec’s system, this gradual price increase gave businesses and British Columbians time to adjust to the incremental rise in costs. In 2008, the carbon tax resulted in a two-cent increase on a litre of gas.

Unlike Alberta’s carbon levy and cap and trade, this $30 must be paid on every single tonne emitted. They are no ‘caps’ on emissions with the carbon tax: the price alone is meant to drive down emissions.

A report released in 2013 — five years into the carbon tax — showed the system had been a resounding success: within four years, B.C.’s per person fuel consumption had dropped 17.4 per cent while in the rest of Canada that number grew by 1.5 per cent.

Total carbon emissions also dropped by 10 per cent during that time while the B.C. economy continued strong. And, amazingly, the carbon pricing mechanism is B.C.’s most popular tax. Who knew there was such a thing?

There are some downsides to B.C.’s prized carbon tax, however.

B.C.’s revenue neutral model means taxes collected are immediately returned to the system and aren’t redirected toward renewable energy, for example.

In the Alberta and Quebec systems, revenue on allowances or credits makes its way into clean technology or green funds. 

The biggest stain on the carbon tax’s nearly spotless reputation is B.C.’s booming natural gas sector. Due to loopholes, the gas industry is exempted from paying for enormous amounts of vented and fugitive methane emissions or for enormous refrigeration facilities used to cool natural gas to create liquefied natural gas (LNG).

And the Christy Clark government’s push for massive LNG exports will likely prevent B.C. from meeting its goal of a 33 per cent reduction in emissions by 2020. 

Image Credit: Magnus Larsson via Flickr