Wednesday, February 20, 2008

The ins and outs of the carbon tax

The Liberals' carbon tax took quick fire from a lot of different directions.
Within a few hours of the announcement, the Canadian Taxpayers' Federation, the B.C. Government Employees Union and the B.C. Green Party had all zipped off press releases complaining about the carbon-tax plan.
Which means it's at least an interesting idea. If right, left and enviros are united in skepticism, the tax has made an impact.
Of course, there was a lot of praise too, from a wide range of sources too.
I don't think you can argue against the principle. The government, reflecting the views of most British Columbians, has decided greenhouse-gas emissions must be reduced dramatically to slow global warming.
That means, fundamentally, burning fewer fossil fuels - gas and coal and oil.
There are other approaches. You can plant trees and can claim you're creating a carbon sink to offset some of the gas you burn in your drive to work. You could pay somebody else to reduce their emissions and count that as your contribution.
But really, meaningful action means emission reductions. That means changes in the way we live - car pooling or insulating our walls or at least walking to the store sometimes.
And while some people will start taking the bus just to help reduce their greenhouse-gas emissions, many more will park their cars if gas prices hit a painful point.
That's the principle behind the carbon tax. The government figured out how much greenhouse gas each fuel produced when burned. (Diesel is worse than gas in cars; oil is worse than natural gas for home heating.) Then it calculated a tax that was intended to work out to $10 per tonne of greenhouse gases produced this year, rising to $30 a tonne by 2012.
So the gas tax will start at 2.4 cents a litre this year and rise 1.2 cents a litre each year after. By 2012, it will be 7.2 cents a litre.
That's one problem with the plan. Gas prices are about 10 cents higher than they were a year ago - in Victoria they jumped six cents in hours this week - but not many people have changed their driving patterns.
And if people haven't considered it worthwhile to put in a more efficient gas furnace, it doesn't seem likely that a one-per-cent tax on natural gas - perhaps an extra dollar week in heating costs - will be move them.
But you've got to start somewhere.
The tax could influence business decisions. But that's a little worrying. Will an energy-dependent company install a more efficient power source or expand into Alberta or Idaho, where there is no carbon tax?
Or will not much of anything change? Les Leyne, the Times Colonist columnist, raised that point with Taylor in the press conference.
B.C. emits about 66 million tonnes of greenhouse gas a year. The government has passed a law saying that has to be cut by one-third by 2020. Without changes, the growth in our population and energy appetite would probably take emissions to more than 80 million tonnes by then.
In 2020, emissions will have to be cut by 22 million tonnes from today's level. But Leyne noted, the carbon tax is only projected to reduce emissions by three million tonnes.
At best, that's 14 per cent of the way to the goal.
There are lots of measures still to come. It sounds odd, but capturing the methane gas from dumps and burning it for heat or power makes a big difference.
The cap and trade system, while still to come, will theoretically encourage companies to reduce their emissions. If they come in under their cap, they can sell the credits to less-successful companies.
But not much will happen when the value of emissions is $10 per tonne. The province plans to charge itself $25 a tonne to cover its carbon emissions. The money will go into its Pacific Carbon Trust, which will use the money to reduce greenhouse gases. (The idea that Gordon Campbell can give the trust $4 to erase the emissions from a round-trip between Vancouver and Victoria is odd.)
Strange days and wild waters. But British Columbians wanted their government to do something about climate change. And it's taken the first steps into the unknown.

Tuesday, February 19, 2008

The five-point B.C. budget guide

OK, here's the five things you need to know about the budget in about 700 words.
First, you're going to get a cheque in June for $100 per person in your household. It's called the "Climate Action Dividend" to try and link it to the budget's green theme. The government hopes you'll use the money to buy a bicycle or a more efficient fridge.
Really it just reflects the fact the government - once again - wildly underestimated revenues in last year's budget. It was on track to a $3-billion surplus this year, and to facing tough questions about why people were waiting for knee surgery or paying such high taxes with all that cash piling up in the government accounts.
So you get a cheque. The measure will cost government $440 million.
Second, you're also going to pay more for gas, oil and other carbon fuels. A new carbon tax will be based on the amount of greenhouse gases the fuel produces, starting at $10 per tonne this year and rising to $30 a tonne by 2012.
Beginning July 1, you'll pay 2.41 cents a litre in a carbon tax on gas - something like $50 a year for a typical family. It will go up 1.2 cents a year. All fuels will be taxed. Figure $35 extra this year if you heat with natural gas, $50 if you heat with oil.
The tax will bring in $338 million this year, rising to $880 million within two years.
The government wants the tax to be revenue neutral -any new money taken in is to be offset by other tax cuts.
So it's made several other tax reductions. A carbon tax tends to hurt low-income families, grabbing a larger share of their limited income. People eligible for the federal GST credit - about 25 per cent of British Columbians - will get $100 per adult and $30 per child. (A carbon tax also hits rural residents harder, but there is no special aid for them.)
Personal income tax reductions will be worth $215 million. For a family of four with household income of $70,000, the savings will be about $200 a year. For a family with an income of $120,000, about $360.
Corporations will get $170 million in tax cuts this year.
Third, this carbon tax is a leap into the unknown. No province or state has a similar tax. The business reps in the budget lockup appeared unsure how much the tax would affect them.
For some industries, like money-losing pulp mills, it's clearly bad news. They'll pay more for fuel and, since they aren't profitable and paying taxes, they won't benefit from the tax cuts.
Broadly, it looks resource industries - which generally use a lot of energy and can't pass increased costs onto their customers - are most worried.
Fourth, beyond the carbon tax, this is largely a status quo budget, for better and worse. Spending leaps a bit this year, thanks to some one-time initiatives, but is forecast to increase less than three per cent in each of the next two years.
So health spending, for example, will rise about six per cent a year for each of the next three years. Not enough to actually allow the health authorities to deliver needed care, but not the noose some had feared.
It showed that the public's message in the conversation on health - that people would to preserve decent care - got through.
It's also status quo in terms of government neglect of some critical areas. The funding to deal with homelessness is almost non-existent. There is a token commitment, for example, to help 1,065 families with rent subsidies of about $80 each, a tiny step. More outreach workers will be hired and shelters will stay open in the daytime.
At a time when some 10,000 to 15,000 British Columbians are homeless and communities across the province are being damaged, the inaction is baffling.
Fifth, there was a broad sense that this government sees the province's future in the Lower Mainland. There was money for mining exploration and incentives to encourage movie-making in the North and Interior.
But the focus was on tech and Asia-Pacific opportunities and financial institutions.
And that, in about 700 words, is what you need to know from this year's 10-inch stack of budget documents.
I hope.

Sunday, February 17, 2008

Throne speech surprisingly interesting

Maybe I've been doing this stuff for too long, but that seemed an interesting throne speech from the Campbell government.
It's foolish to get too fired up about the ritual. There's not necessarily a link between all those words, read by the lieutenant governor, and what government actually does.
But the speech read by the province's first aboriginal lieutenant governor - a significant milestone - had some interesting ideas. Both good interesting and bad interesting.
Take three. In education, health and climate change.
The government promised a serious look at dramatic improvements in early childhood education. A new agency will "assess the feasibility and costs of full school day kindergarten for five-year-olds." It will also look at providing parents with the choice of day-long kindergarten for four-year-olds by 2010, and for three-year-olds by 2012. The report is to be done by next spring - a few months before the election.
The change could be hugely positive, especially for kids from poorer families. The reality is that a five-year-old from an affluent family, with a stay-at-home mum and play groups and story times and junior gym is a lot more ready for kindergarten than a five-year-old growing up with a single-parent earning just above minimum wage.
A good early childhood education program would let more children start school confidently and capably. That success could carry them a long way.
And if cost is an issue, then the FSA test results could be put to good use. Start the program in the schools with the weakest performance in basic skills.
In health, there's proposals to cheer and to fear.
The government seems keen on doing things cheaper, which is good. It wants nurses to do more - sewing up wounds and such. And it wants their schooling cut from four years to three, another good change. Better more nurses - or doctors - slightly less well-trained, than a shortage.
But it's also still pitching the myth that we can't afford health care. The government wants to pass a law making "sustainability" a sixth principle under the Canada Health Act, alongside equal access to care and the rest. It's unclear what that means, but the suggestion is that access to care will be cut to reduce costs.
And maybe, at some point, there will be have to tough limits on car.
But we're spending relatively little on health care in B.C. today. Internationally, health-care costs in Canada are smaller share of GDP than most Western countries - about one-third less than the U.S.
In 1985, government health care spending was five per cent. By 1995, it had risen to 6.6 per cent. The increase has slowed since. This year, it will be about 7.2 per cent. Given our rising expectations and aging population, that's not an unreasonable increase.
Looked at another way, government health spending consumes about one-third of revenues today - as it did in 1995 and 1985.
And the throne speech promises a study of an Independent Living Savings Account. It sounds like an RRSP, except you can only use the money for care when you're old - home support or residential care.
That would benefit people with money to set aside. And those who didn't have any extra income available would subsidize their tax break.
And it raises questions how limited the government believes support for seniors in the future, if it's warning people to set aside money today if they can.
On climate change, the throne speech was alarmingly short on specifics. Campbell was clear that the government wasn't going to be deterred from tough action.
But there is a sense of a great leap into the unknown here. The targets are in place, but the government still doesn't seem to know how to get there or what it will cost.
Footnote: The throne speech included a big flood of ideas and initiatives. But there were some gaps. The big problems in the forest industry - right now and the coast, and coming in the Interior - received no real attention. And there was no mention of the Heartland, or whatever the current favorite term is. The challenges of smaller communities no longer seem a priority.