B.C.’s Carbon Tax Turns Seven: Is It Working?

Busy Granville Street Vancouver

By Arman Kazemi

July 16, 2015

As B.C.’s Carbon Tax turned seven this month, a new study reviewing the success of the policy and future directions has been released.

Published jointly by the University of Ottawa’s Institute of the Environment and the Nicholas Institute for Environmental Policy Solutions at Duke University, the review celebrates the carbon tax as “a textbook case of environmental taxation because of its broad coverage, the ease of implementation and its revenue neutrality.”

The first of its kind in North America, B.C’s carbon tax has accounted for five to 15 per cent of the province’s greenhouse gas reductions since its introduction in 2008 by the B.C. Liberals under Gordon Campbell.

These reductions were achieved with “negligible effects on aggregate economic performance” thanks to broad-based tax cuts to industry as well as special low-income credits to vulnerable and rural households.

The tax has accounted for revenues of up to $6.1 billion to date, while balancing expenditures such as the Low Income Climate Action Tax Credit total $7.1 billion have supported the tax’s aim of being revenue neutral.

But since Christy Clark assumed the premiership, carbon tax increases have at $30 per tonne, an increase of $20 per tonne since first introduced in 2008, but still at a level some analysts say is too low to be fully effective.

Some critics, including Don Cayo at the Vancouver Sun, suggest that the present Liberal leadership “has failed to increase the low-income tax credit in step,” all while diverting what broad-based tax compensations existed to “narrowly targeted ‘boutique’ tax credits.”

According to report co-author Nicolas Rivers of the University of Ottawa, the tax’s effectiveness hasn’t been directly undermined as a result of these measures, “but it could be if this trend continues,” and trend that Rivers considers “worrisome”.

As the report claims, British Columbia has given (and continues to give) “perhaps the closest example of an economist’s textbook prescription for the use of a carbon tax to reduce GHG emissions,” informing similar policy development around the world.