GLOBE Foundation

BC introduces carbon tax to fund climate change initiatives


Source: GLOBE Foundation

The BC budget released yesterday by Finance Minister Carole Taylor was heavily focused on environmental issues by including $1 billion in funding for climate change initiatives over the next 4 years and the introduction of a provincial, revenue neutral carbon tax. Although this is positive news for the environment, many feel that reliance on a carbon tax and incremental funding may not be enough for BC to achieve its climate change goals.

The tax will be introduced July 1, 2008 and will begin at a low rate and increase gradually to give individuals and businesses time to adjust starting at 2.41 cents per litre of gasoline and eventually reaching 7.24 cents per litre by 2012.

It will apply to virtually all fossil fuels, including gasoline, diesel, natural gas, coal, propane, and home heating fuel - making it among the broadest and most comprehensive in the world.

According to a Budget related press release, the purpose of the carbon tax is to encourage individuals and businesses to make more environmentally responsible choices, reducing their use of fossil fuels and related emissions.

'The principle is simple,' said Taylor. 'Tax carbon-emitting fuels to discourage their use, and give the money back to people, back to businesses, so they have control. They can make their own choices about how the tax affects them. At the same time, by making greener choices more commercially viable, it will stimulate innovation and open up new economic opportunities across British Columbia.'

The tax is expected to generate $1.8 billion over three years, all of which will be returned to individuals and business through reductions to other taxes.

This revenue will be returned to businesses and individuals through a new Climate Action Credit for persons with lower incomes ($395 million) and reductions to personal income tax rates ($784 million), the small business income tax rate ($255 million), and the general corporate income tax rate ($415 million).

In addition to the revenue-neutral tax reductions, every British Columbia resident will receive a one-time, $100 Climate Action Dividend to help people adopt greener lifestyles. At a total cost of $440 million, the dividend payments will be issued in June, before the new carbon tax takes effect. The government hopes that British Columbians will apply the funds toward purchases that can help reduce their greenhouse gas emissions and, by doing so, the amount of carbon tax they would otherwise pay.

Environmental groups were broadly supportive of the carbon tax, stating that it would provide incentives for companies to invest in cleaner and more efficient energy technologies.

However business and government representatives alike believe that a revenue neutral tax is not enough to motivate companies to invest in green technology or for individuals to modify energy use because there is no real cost.

Quebec introduced a form of carbon tax last year but the revenues return to government green technology initiatives, not taxpayers.

The budget allows major industrial polluters to avoid the tax initially and provides large subsidies to expand carbon-intensive activities in the fossil fuel industry. These include a 24% increase in oil and gas subsidies in 08/09-to $327 million -as well as continued funding and promotion of coastal oil and gas drilling, and a $621 million larger allocation for highway expansion than for transit. In BC the fossil fuel industry emits approximately 20% of the province’s greenhouse gas emissions.

'I think they were pretty quick to pull out the stick when it comes to accomplishing environmental objectives,' Laura Jones, vice-president at the Canadian Federation of Independent Business disagreed with the idea of a carbon tax saying,

'We know from our surveys that over 80 per cent of business owners are already taking action to get cleaner,' she added, saying that is happening without a tax in place.

Federal Finance Minister Jim Flaherty has stated in the past that a variety of carbon taxes and greenhouse gas rules across the country are not a good solution to Canada’s environmental problems and that the country needs to work toward a common set of regulations aimed at reducing greenhouse gas emissions.

While not specifically recommending a carbon tax, a recent report by the National Roundtable on Environment and the Economy (NTREE) argued that Canada could achieve its greenhouse gas (GHG) reduction targets of 20% by 2020 and 65% by 2050 by implementing a strong, clear, consistent and certain GHG emission price signal across the entire Canadian economy as soon as possible.

The report argued that the immediate introduction of market-based policy that takes the form of an emission tax or a cap-and-trade system or a combination of the two not only is economically feasible, but quite likely is the only way of achieving the federal government’s stated emission reduction targets.

The $1 billion allocation over four years to fund technology and provide incentives for energy efficiency and clean energy use could prove to be a very effective method in achieving provincial climate change goals.

Some of the notable climate change initiatives include:

  • $98 million for the new LiveSmartBC: Efficiency Incentive Program and other initiatives to encourage individuals and communities to make more energy-efficient choices for their homes, businesses and vehicles;
  • $33 million to provide tax relief for the purchase of conventional fuel-efficient vehicles that meet the fuel efficiency criteria set out in the federal government’s ecoAuto rebate program;
  • $33 million for transportation initiatives to reduce emissions from commercial truck and ship traffic at B.C.’s ports and in technology to reduce idling at truck-stop and weigh-scale locations;
  • $9 million for key commitments from the 2007 throne speech and the Energy Plan such as designing a Green Building Code, creating emissions standards for landfills and new motor vehicles, and developing a 'cap and trade' system for large greenhouse gas emitters.

The BC budget provides for some of the most aggressive climate change action initiatives taken by any Canadian jurisdiction to date. BC has raised the bar for other provinces with respect to climate change and sustainability.

The Minister made it clear that the carbon tax alone would not ensure that BC will meet its emission reduction goal to reduce carbon emissions by 33 per cent below 2007 levels by 2020. Ms. Taylor said the carbon tax is 'just one piece of the puzzle' and more initiatives, including a cap and trade system expected this fall, will be needed

'This budget marks a turning point,' said Taylor. 'It overturns the notion that you have to choose either a healthy environment or a strong economy. It will help keep British Columbia vibrant and growing, it takes a big step toward meeting the challenge of climate change, and it strengthens key public services like health care and education.'

The issue of carbon taxes, and cap and trade systems is the topic of a closing Town Hall meeting at GLOBE 2008. National and international experts will debate the pros and cons of carbon taxes and cap and trade systems.

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