British Columbia’s Carbon Tax Shift: Design and Implementation Challenges

Tom Pedersen, University of Victoria

and

Stewart Elgie, University of Ottawa

Latin American Carbon Forum, Bogota, September, 2014

The BC Carbon Tax: Key Design Points • Accelerating:

• July 1, 2008: $10 per tonne of CO2 emitted rising $5/yr to $30/t in 2012 (now frozen)

• this provision appears to have changed behaviour in BC

• Revenue neutral (in fact, it’s revenue negative, since Year 1): • every penny goes to reductions in other taxes• now irrevocable, as income taxes would have to rise

substantially if the tax was repealed

• Fair: • tax reductions and supports focused on lower income strata

• Simple: • the tax is applied at wholesale distribution points (six such

points in BC). Thus, no additional bureaucrats needed.

• Carbon tax rate is based on carbon content of fuels. Rates as of July 1, 2008 and July 1, 2012, calculated on the basis (for 2012) of $30 (CAD) per tonne of CO2 equivalent emitted.

• Revenue neutrality – tax shifting, not imposing:• no opportunity to claim “just another government tax grab”.

• Competitive disadvantage:• remains an issue since most trading jurisdictions have not

followed BC’s lead (unexpectedly, as of thinking in 2008).

• Politics: • centre-right “BC Liberal Party” was re-elected in 2009.

Captured environmental vote when the left-centre party campaigned with, “Ax the tax!”. Re-elected again in 2014.

• Economic stimulation:• cleantech is one of the fastest growing economic sectors in BC

(as of 2012).

• Communication with broader society is a must:• tax shifting remains poorly understood in BC.

Implementation Issues, Positive and Negative

www.pics.uvic.ca

Prof. Paul Ekins, Chair of the UK’s Green Fiscal Commission:

“BC’s carbon tax is a template for the world.”

Per capita fossil fuel consumption, 2000-2013

Rest of Canada

British Columbia

July 1, 2008

19%

July 1, 2012

Data compiled by Stewart Elgie, University of Ottawa

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er c

apita

British Columbia’s Economic Performance: % Change in GDP (f = forecast)

CanadaBritish Columbia

Chan

ge in

GD

P, %

Statistics Canada data; graph compiled by Stewart Elgie, University of Ottawa