British Columbia`s carbon tax - are its days numbered?

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Source: GLOBE Foundation

The British Columbia Jobs and Investment Board (BCJIB), a body established in February 2012 to build on BC's post-recession boom in exports and the momentum of the BC Jobs Plan, has released an interim report that calls for, among other things, the elimination of BC's milestone carbon tax.

The report, which contains recommendations for each of the eight sectors identified as priorities for economic development in BC's Jobs Plan, suggests the province should slash or eliminate its carbon tax as part of a broad-based effort to create jobs and stimulate the provincial economy.

BCJIB Chairman Ray Castelli quoted in an interview noted that the Board is considering more than 100 policy recommendations, and decided to release an interim report highlighting 33 of them 'to get the ball rolling.'

With respect to BC's carbon tax, which was introduced in 2008, the report calls for its elimination or significant reduction due to its fiscal impact on the competitiveness of certain sectors, in particular, the transportation and energy sectors.

'Depending on the industry, there's a sentiment that if you have a tax on your product or your imports that your global competitors don't have - cement distributors are a good example, or the transport industry - you could make the argument that your particular sector is being disadvantaged,' said Castelli in the interview.

He added that there was consensus among the Board that the fate of the tax was a complicated question for the Provincial Government because it was originally tied to a reduction in personal income taxes.

Opinions on the merits of the carbon tax are deeply divided. In July, Sustainable Prosperity, a University of Ottawa-based research network, argued the first four years 'have had a positive environmental impact without harming the [BC] economy.'

It outlined four key reasons why the tax has been a success: use of petroleum fuels (subject to the tax) has dropped by 15.1%; BC's GDP growth has outpaced the rest of Canada's; the tax is 'revenue neutral' and has returned far more in tax cuts (by over $400 million) than it has received in carbon tax revenue; and BC's per capita GHG emissions have declined by 9.9%, outpacing the decline in the rest of Canada.

A report from the Pembina Institute agrees generally with these findings. Based on a series of confidential interviews, the Pembina report said a strong majority (64%) of the respondents believed that the carbon tax has had positive consequences for the province, while only a small minority (18%) thought it had negative consequences.

The Jobs and Investment Board Interim Report also recommended enhancements to the tax credit program to improve the economic climate for BC's technology sector, which employs in excess of 18,000 people. These recommendations include enhancing the BC Investment Tax Credit Program by eliminating the current annual maximum of $200,000 per individual or corporation; increasing the maximum credit for a corporation from the current $5 million to $10 million; and extending the tax carry-forward period for corporate investors from the current 5 to 10 years.

The report also recommended increasing the BC Renaissance Fund with an initial $90 million in order to provide further start-up and growth capital to technology companies and attract more venture funds to operate in the province of BC.

With respect to the energy sector, the report calls for modifications to the Provincial energy policy to allow for greater use of natural gas as a primary solution for power supply in urban and industrial areas of the province. In addition, it advocates promoting the alternative uses of natural gas including transportation fuel, gas to liquids, and production of certain petrochemicals.

Overriding Issues

A number of overarching issues were identified by the Board as having pronounced impacts on the provincial economy. Uncertainty about the supply of a skilled and labour force and doubts about the quality of education/skills training for many key sectors was a key issue identified.

A second common barrier identified was the Province's business and regulatory environment - particularly for natural resource sectors - where timeliness and clarity around permitting for resource access and/or construction impact investment.

A third potential barrier to growth across many industries was ongoing uncertainty with respect to First Nations consultation and accommodation processes. The Board welcomed the Government's decision to form a companion Aboriginal Business and Investment Council.

Finally, the business climate and competitiveness of the province's manufacturing sector impacted on most of the priority sectors of the economy. Board members recommended greater focus in upcoming discussions on the challenge of developing an advanced manufacturing sector in BC.

Other highlights of the report include:

  1. Furthering work to ensure a reliable timber supply.
  2. Redrafting consultation and accommodation guidelines with First Nations to improve transparency and clarity regarding the responsibilities of the Crown versus those of the private sector.
  3. Addressing skills shortage in the mining, natural gas and international education sectors.
  4. Increasing marketing of BC's agri-foods (aquaculture, blueberries and wine) markets.
  5. Increasing incentives and access to venture capital for the technology sector.
  6. Establishing a new model for Provincial Tourism Destination marketing.
  7. Establishing a Northern Ports Strategy.
  8. Improving market access and a greater share of IRB investment for BC's aerospace and defence sector.
  9. Establishing a centralized application process for post-secondary and international education.

The Board will refine these and other recommendations with the goal of developing a final report by early 2013.

In several areas, the Board's Interim report echoes the findings of research recently completed by GLOBE Advisors on British Columbia's clean economy. A soon-to-be published series of reports highlight the importance of a stable policy environment in critical areas of BC's economy in order to stimulate job creation and investment, particularly in the areas of clean energy, green building and energy efficiency, and clean transportation.

GLOBE research findings however contradict the Board's recommendations to eliminate or reduce the carbon tax, which has been shown to increase overall productivity, improve efficiencies, and generate sustainable employment opportunities by making industry more competitive in the long-term.

Further information on the GLOBE Advisors research with respect to the clean economy of the Pacific Region is available here.

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