British Columbia Introduces Revenue-Neutral Carbon Tax

02/20/2008 by Daniel Rosenblum

British Columbia’s Finance Minister Carole Taylor introduced a revenue-neutral carbon tax today that will serve as an excellent model for the United States. According to a story in the Canadian Press, the carbon tax will be effective July 1, will be phased in over five years and will start at a rate of $10 per tonne of carbon emissions. It will rise $5 a year to $30 per ton by 2012. The carbon tax revenues will be returned to taxpayers through personal income and business income tax cuts, according to Taylor. 

BC Mountains and Lake_1.jpgAccording to the same story, climate specialist Ian Bruce of the David Suzuki Foundation stated that "The Government has used the most powerful tool, a carbon tax, to reduce greenhouse gas emissions." As Bruce pointed out, "Green choices will become cheaper."

B.C. can now be proud of its natural beauty and its wise public policy designed to reduce the impact of climate change. Note that the proposed new carbon tax is very similar to the revenue-neutral, phased-in carbon tax proposed by the Carbon Tax Center. 

For more on the new B.C. carbon tax, see stories at right under "Latest Headlines." 

Photo: bfraz / flickr


18 Comments »

  1. It is interesting that BC is also part of the Western Regional Climate Initiative, which envisions a regional cap-and-trade system.  How will the two interact?  Taylor doesn’t seem to know, which is disconcerting.  There is no theoretical reason why you can’t have both, i.e. a "cap-and-tax" system.  But it should be carefully planned.

    Comment by Jonathan Zasloff — February 22, 2008 @ 8:48 pm


  2. Carbon taxes won’t work.
    It’s just a money-grabbing ploy to add to inflation.  You have to show me where it has worked to reduce emissions where it has been introduced! The fuels burned by cars is miniscule compared to the outputs by by some industries in the province, namely pulp and paper, cement plants, oil refineries and the like.For example:  In the manufacture of cement, prodigious amounts of natural gas is burned in the kilns to convert limestone (Ca CO3) to Calcium Oxide (CO) which in itself releases horrific amounts of CO2 into the air during the process.  So, not only are they using fossil fuels in the form of natural gas, they are adding to the CO2 by burning the limestone!!!  So, if one cement plant produces 1,000,000 tons of cement in a year, they will also produce as part of the process more than 400,000 tons of CO2.   It’s nice to know that a cement plant will only be taxed on the fuel it consumes, not on the CO2 it emits as part of its processes which is more than 5 times that emitted by burning the natural gas.  

    Comment by Dave Russell — February 24, 2008 @ 6:14 pm

  3. It is encouraging, and a relief, to see implementation of a carbon tax, especially one — like the BC’s initiative — that is revenue neutral and will be implemented in gradual form. I have my reservations about this BC tax, how it is to be refunded, how it is to be integrated with other Canadian (and US, hopefully) initiatives, but at least this is doing something. So once Lenten restrictions are off, I will drink a toast to the Wise Elders of BC and the enlightened citizenry who elected them.

    Comment by David Ocampo G. — February 25, 2008 @ 3:18 pm

  4. First, let me say that I love the idea of a carbon-tax.  It’s great!  But the BC tax misses the mark.
    It doesn’t promote energy efficiency because the money goes right back to the consumer.  With no annual change in costs, why would anyone bother to change their habits?
    Instead of lowering income taxes, subsidize the price of hybrids!  That’ll save consumers money and cut down on carbon emissions.

    Comment by Nicholas — February 25, 2008 @ 4:44 pm

  5. This is excellent!  It is essentially the carbontax.org program! Congratulations!Comments on previous posts:#1.  There is no need for cap-and-trade, since "carbon credits" can be bought from the government by paying the tax.  However, the tax is to be introduced on July1st, and I have not seen the administrative proposals. The easiest is to collect the tax, at mine, well-head or when the fuel is imported.#2   To my knowledge this is the first state/province wide tax (except a miniscule tax in Quebec that hardly affected prices), so no prior example exists. It would have been as sensible to ask the Wright brothers to show prior examples of flight before allowing them to take off.  Of course the fossil carbon used in cement production should be taxed, along with the fuel.#3   Excellent post.#4.  There is a problem that the price changes may be too small to affect behaviour, but that is because a bigger tax is needed (see Global Warming: The Answer. (The Energy Dividend)).   Suppose the tax was $250 a ton (rather than $10 a ton) to double the price of coal-based electricity.  Don’t you think people would turn off unneeded lights, and use their monthly rebate, on untaxed consumption?This is an excellent first step, but  the tax rate will need to be increased substantially before we will stop using fossil fuels.  (carbontax.org estimates that a tax of $10 a ton of carbon incremented annually by $10 a ton, will merely stabilize current levels of CO2 emissions, leading to continued, if somewhat slower, increase in atmopsherice CO2, and associated climate deterioration.)

    Comment by Will Candler — February 25, 2008 @ 7:09 pm

  6. #2: carbon taxes (fuel taxes) have worked in Europe to reduce fuel consumption and increase fuel economy of vehicles.  Good point about the limestone.  I guess we’ll have to count that as a fossil fuel.  As for the impact of vehicles, transportation is 40% of BC’s CO2 emissions since our power is almost entirely hydroelectric.  Not sure how much of that is boats and airplanes, but I’d wager less than half.  So cars are significant, although not dominant to be sure.
    #4: commuting in a hybrid vehicle is good.  But leaving your V8 landrover parked in the driveway is better.  Fuel economy is overrated.  Focus on the fuel consumption, not the fuel consumption per km driven.  Hence – tax the fuel not the vehicle.  Give consumers the money and let them decide what they want to subsidize.
    I think cap-and-trade and carbon-tax can coexist.  The tax will just decrease the value of the emission credits.  Jurisdictional discontinuities need to be managed though, for sure.
    Yep.. this is just the beginning.

    Comment by Jurgen Hissen — February 27, 2008 @ 4:48 am

  7. #4 Nicholas “With no annual change in costs, why would anyone bother to change their habits?”

    A couple of reasons,
    1. Each consumer would still see higher prices at the pump and elsewhere. Even though they might be expecting to recoup the money later in the year, there is still a greater incentive to conserve now.
    2. Not everyone will see zero change in costs. Heavy carbon emitters will realize they are losing money (or giving it to their greener neighbors) and will have an even larger incentive to reduce emissions.

    Comment by Bob Arning — February 27, 2008 @ 5:25 pm

  8. #5, 6, 7
    I appreciate all your thoughts.  #5 – I think you’re right about the tax needing to be bigger, but your strategy is still one sided.  There’s no added incentive to encourage good habits.  We can’t just make negative consequences, there should be positive ones too. 
    #6 – Sure, not driving at all will always be better than driving.  But we have to be realistic too.  Our society is set up where people need to drive to get around.  Since we can’t get rid of driving all together (yet), let’s at least make it efficient too.
    #7 – In today’s world, a 10 cents/gallon change occurs weekly anyway.  Unless this tax comes with a heavy marketing campaign, I have a feeling many people won’t even notice the change. 
    (More of my thoughts at http://www.smartsense.wordpress.com)

    Comment by Nicholas — February 27, 2008 @ 5:58 pm

  9. Nicholas:
    Pressure needs to be applied to using the car less, not just to the choice of car.
     
    The strategy only needs one side.  "carrot" programs are unworkable because they invariably distort the economy.  What’s more virtuous: riding your bike or buying a hybrid car?  What about staying home that day?  How much government money does each qualify for?  And who’s going to pay the busy-body accountants that judge all the worthiness (and what’s keeping them honest?  The biodiesel lobbyists?). 
     
    No more central planning, please.  Carbon taxes can correct the externalities that lead to a tragedy of the commons.  That’s all that’s required.  They just need to be big enough.

    Comment by Jurgen Hissen — February 28, 2008 @ 2:18 am

  10. #8.  Nicholas said "There’s no added incentive to encourage good habits."     We can do "revenue neutral" in three ways (a) compensating reductions in other taxes, (b) compensating subsidies to "encourage good habits", or (c) return revenue equally per capita (i.e. quite regardless of carbon expenditures by the recipients.)   I prefer (c), see below, but if "the sense of the Meeting" is that (a) or (b) is the way to go, so be it.  Lets replace a really bad idea, "a free ride for polluters" by any of these good ideas (a), (b) or (c).  My reservations on tax reductions is that we all pay the carbon tax, but only tax-payers get a refund (pity the poor poor!). My reservation about "encouraging good habits" is that it involves the government in "picking winners".  A subsidy to buy a hybrid, when I could use public transport?  A subsidy to install a PV roof panel, when absent the subsidy it would be cheaper to buy fossil-free electricity? "Encouraging good habits" distorts; however "encouraging good habits" sure beats encouraging bad!   Peace!

    Comment by Will Candler — February 28, 2008 @ 4:11 pm

  11. Hi Jurgen, Carbon taxes aren’t enough.  As it is, I drive as little as possible.  And although you and I may agree a bicycle is more virtuous than a hybrid, the maniac city traffic with doesn’t seem to care (Seattle isn’t NYC, but give it time …)Let’s assume that not everyone can completely give up all driving.  Wouldn’t it be better if those that must drive at least do it efficiently?

    Comment by Nicholas — February 29, 2008 @ 3:55 am

  12. OK, revenue neutral, how do I apply as a tourist for reimbursement on gasoline purchased in British Columbia.

    Comment by Len Hills — May 5, 2008 @ 8:56 pm

  13. A carbon tax is an obvious way to go but surely there are other things we can do - there’s plenty of green technology out there just waiting to be developed. What about this hydrogen injection system that claims to increase your car’s mpg by 50%?

    Comment by John Richards — May 8, 2008 @ 3:28 pm

  14. Carbon neutral will take serveral years to occur but with sufficient planning is achievable. I agree that limitations on car use/ number is a step in the right direction.Good post, thanks. 

    Comment by dating — May 9, 2008 @ 11:34 am

  15. It good that Green choices will become cheaper as It is our responsibility to protect the earth. With cheaper chioces, more people can afford it.
    Thank you for the great post.

    Comment by Water4Gas — July 11, 2008 @ 10:14 pm

  16. [...] months we’ve been touting the British Columbia carbon tax, and for good reason. Not only is BC’s carbon tax the highest by far in North America ($10 per [...]

    Pingback by Carbon Tax Center » B.C. Carbon Tax Backlash: How Real? — July 26, 2008 @ 10:34 pm

  17. I grow weary of closed minded experts we have to be open to all options no matter hwo unlikely our energy solutions my come from a small r&d company or even out of someones garage.

    Comment by jimma — September 18, 2008 @ 1:00 pm

  18. Any carbon tax for the manufacture of cement only needs to account for the combustion of the natural gas to heat the kilns, plus any transportation costs.  The CO2 released by the limestone upon combustion is later absorbed back into the cement over time after it has been turned into a building from the air, forming calcium carbonate. This process is more or less efficient depending on the type of cement used.

    Comment by Joe — December 7, 2008 @ 10:56 am

RSS feed for comments on this post. TrackBack URI

Leave a comment