The Merits of Carbon Pricing in B.C.

Although the ruling Conservative federal government has fought any mention of a national carbon tax, individual provinces like British Columbia (B.C.) are moving forward with their own initiatives.

B.C. enacted a carbon tax in 2008 that covers about 70 percent of fossil-fuel consumption. B.C.’s carbon tax is currently pegged at $30 a ton. It has helped the province’s per-capita emissions decline almost 10 percent from 2008 to 2010. B.C.’s carbon tax has also played an instrumental role in convincing the US states to embrace carbon pricing. B.C. forged an agreement with Washington, Oregon and California to create the Pacific Coast Action Plan on Climate and Energy. Their plan is to prioritize clean energy and innovation through a strong economic incentive provided by a carbon tax or form thereof. These jurisdictions collectively represent 53 million people, and an economic region with a combined GDP of $2.8-trillion — making it the world’s fifth-largest economy.

B.C.’s carbon tax is revenue neutral, which means the money generated by the tax funds personal and business tax cuts. Under the scheme gas cost an addition 6 cents per liter and families pay an average of $386 per household per year. Since 2008, the carbon tax has raised a total of $3.7 billion.

“What we’ve been able to show, and what we can show to a greater extent going forward with our jurisdictions, is that this can be good for business and good for the economy,” B.C.’s Environment Minister Mary Polak said.

In 2013 Québec also introduced a cap-and-trade system as part of its membership in the Western Climate Initiative (WCI).

“The intuition behind carbon pricing is straightforward: we should tax things that we do not want, and making it more expensive will reduce pollution,” Marc Lee, senior economist at the Ottawa-based Canadian Centre for Policy Alternatives in Vancouver, said in a Jan. 13 report. “A carbon tax provides greater certainty around the price of GHG emissions, but poses a great deal of uncertainty around actual emission reductions.”

For oil-sands producers, carbon pricing may be the answer to reduce risk associated with carbon regulation and access to markets, said John Stephenson, a Toronto-based fund manager.

“What business hates is a lack of clarity,” Stephenson, who helps manage $2.7-billion at First Asset Investment Management Inc., said. “Even a bad tax would be better than discussions that are endless.”

A large and growing number of respected organizations are calling for a carbon tax, this includes the International Energy Agency, the United Nations, and the US Congressional Budget Office. The fact that B.C.’s economy is outperforming most of Canada speaks to the fact that you do not have to choose between a healthy environment and a strong economy.

By re-electing the Liberals twice since 2008, B.C. further demonstrates that a carbon tax can be politically viable.