British Columbia’s carbon tax shift was raised by $5 on July 1, four years after it was first initiated by the government.
Has the plan worked and how will the new increases impact the economy?
Sustainable Prosperity, a University of Ottawa-based research network, thinks the first four years “have had a positive environmental impact without harming the [BC] economy.”
In a report, Sustainable Prosperity outlines the key reasons why it thinks the initiative has been a success, although it admits it’s still early days:
1.DROP IN FUEL CONSUMPTION: “The carbon tax has contributed substantial environmental benefits to British Columbia (BC). Since the tax took effect in 2008, British Columbians’ use of petroleum fuels (subject to the tax) has dropped by 15.1% — and by 16.4% compared to the rest of Canada. BC’s greenhouse gas emissions have shown a similarly substantial decline (although that analysis is based on one year’s less data).”
2.GROWTH UNAFFECTED: “BC’s GDP growth has outpaced the rest of Canada’s (by a small amount) since the carbon tax came into effect – suggesting that it has not adversely affected the province’s economy, as some had predicted. This finding fits with evidence from seven other countries that have had similar carbon tax shifts in place for over a decade, resulting in neutral or slightly positive effects on GDP.”
3.REVENUE NEUTRAL: “The BC government has kept its promise to make the tax shift ‘revenue neutral’, meaning no net increase in taxes. In fact, to date it has returned far more in tax cuts (by over $300 million) than it has received in carbon tax revenue – resulting in a net benefit for taxpayers. BC’s personal and corporate income tax rates are now the lowest in Canada, due to the carbon tax shift.”
4.GREENHOUSE GAS EMISSIONS DECLINING: “From 2008 to 2010, BC’s per capita GHG emissions declined by 9.9% — a substantial reduction. During this period, BC’s reductions outpaced those in the rest of Canada by more than 5%.”
A report from the Pembina Institute echoes SP’s sentiment, bit identifies the challenges ahead.
“Four years into B.C.’s carbon tax experiment, there are some challenges the province needs to confront and also many encouraging signs of support and early success,” said Matt Horne, director of climate change at Pembina “Other provinces and the federal government need to consider these lessons and move ahead with similar types of policies if Canada is going to improve on its poor track record of dealing with climate change.”
The institute conducted 39 confidential interviews with BC business leaders, community leaders and academics and found that 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.
When asked about the future of the carbon tax, participants were split on whether or not it should continue to increase in the absence of similar policies elsewhere in North America, Pembina noted in a statement. “However, there was strong support to fill the gaps left from the province’s stalled effort on cap-and-trade and to use at least a portion of any new carbon tax revenue to invest in projects that reduce greenhouse gas emissions.”