Canadian Practice Law Update
07/10/2012
British Columbia Carbon Tax Four Years On
By Michael A. Nesteroff | Shareholder
The fourth anniversary of British Columbia’s carbon tax — the only one of its kind in North
America — was marked with an increase on July 1 that raised the tax on gasoline in the province
by a penny per litre to 6.67 cents ($0.25 per gallon). The tax has been controversial from the start,
and it is no less so now four years into the program. The B.C. government, headed by the Liberal
Party, has launched a comprehensive review of the tax but, with an election coming up next year,
the voters could have the final say.
The tax started at a price of $10/tonne on carbon emissions from the burning of fossil fuels, and
with the July 1 increase, it is now up to $30/tonne. Consumers and businesses receive income tax
breaks and credits intending to make the carbon tax revenue-neutral, but last year’s $1.15 billion
in tax cuts and credits exceeded the $960 million in tax revenue. Moreover, it is not clear whether
the tax is having the intended effect of actually reducing greenhouse gas emissions.
A June 27 report, British Columbia’s Carbon Tax Shift: The First Four Years, by Sustainable
Prosperity concluded that the tax has produced substantial environmental benefits by reducing
B.C. residents’ use of petroleum fuels by 15.1 percent, and by 16.4 percent compared to the rest of
Canada. The report concludes that B.C.’s economic growth has been slightly ahead of the rest of
Canada, indicating that while the tax has not had a positive effect on the B.C. economy, it has not
had an adverse effect either. In addition, the provincial government has returned more than $300
million in tax cuts, which is more than it received in carbon tax revenue. The report concludes the
carbon tax shift “has contributed to noteworthy environmental gains, and lower overall taxes,
without evident harm to B.C.’s economy (and potentially improving its future positioning),” but
suggests detailed economic analysis is necessary.
While the B.C. government, currently headed by the Liberal Party, has undertaken a
comprehensive review of the carbon tax, there also is an election next year and the carbon tax
could be a key issue. The Liberal Party wants to keep the tax, while Conservative leader John
Cummins, whose party vows to repeal the tax, recently called it a “job-destroyer and hugely unfair
to anyone outside of metro Vancouver who depends on a car.” Cummins also said, “It is not a
good tax, which is why we’re the only jurisdiction in North America with a carbon tax.” The
opposition New Democratic Party, which campaigned against the tax in 2009, now wants to keep
it but with some revisions, such as elimination of corporate tax breaks.
At this point it’s hard to tell who is right, and in large part the outcome of the provincial election
and the tax will hinge on public perception. On that score, however, there may be some
differences between policy makers and the public. The Pembina Institute produced a June 25
report, British Columbia’s Carbon Tax, which relied on interviews with 39 participants from
business, government and academia. The results of those interviews are significantly different
from the results of an April 2011 public opinion poll. In the interviews, 65 percent of the
participants had a “somewhat” or “very favorable view” of the overall consequences of the tax,
while only 33 percent of the public opinion poll respondents were “positive” to “somewhat
positive.” Similarly, when asked whether the tax should increase beyond the new July 1, 2012,
rate, 41 percent of the interview participants agreed, while only 29 percent of the public poll did.
While more rigorous modeling and studies are needed, a detailed study of the tax may ultimately
have less effect than how B.C. voters may feel in Spring 2013.
*This article was originally posted on the Sustainability & Climate Change Reporter blog.
For more information, please contact the Canada Practice Group at
Lane Powell: canadianlaw@lanepowell.com
This is intended to be a source of general information, not an opinion or legal advice on any
specific situation, and does not create an attorney-client relationship with our readers. If you
would like more information regarding whether we may assist you in any particular matter, please
contact one of our lawyers, using care not to provide us any confidential information until we
have notified you in writing that there are no conflicts of interest and that we have agreed to
represent you on the specific matter that is the subject of your inquiry.
Copyright © 2012 Lane Powell PC
Seattle | Portland | Anchorage | Olympia | Tacoma | London
2