What’s next for BC’s carbon tax?

January 15, 2013

Climate change forced its way onto the political agenda in 2012, as Hurricane Sandy ripped through the northeast United Stages just days before the election. And while action remains frustratingly slow, extreme weather disasters in the billions of dollars are making a statement that politicians can no longer ignore. The costs of our addiction to fossil fuels are starting to pile up, and we cannot afford to keep dithering.


Saying no to new fossil fuel infrastructure like the Enbridge pipeline is an essential first step towards a shift to a clean energy economy. But to pass the political test, climate action must also speak to a positive vision of a zero carbon BC. It must be fair, build alternatives like public transit and district energy, and create good jobs in areas that lower our greenhouse gas emissions.

Decarbonizing our economy will take time, and let’s face it, money. BC has an advantage here from its large base of clean electric power, its early actions on climate, and, in particular, the carbon tax. While it is hard to differentiate between the impact of climate actions and the recession, the carbon tax deserves some of the credit for BC's drop in GHG emissions, down 4.5% as of 2010 relative to 2007 levels.

A revamped and reformed carbon tax regime should be the engine for the "green industrial revolution" the province needs. Making the combustion of fossil fuels more expensive shifts incentives away from carbon-intensive activities, while providing revenues to build the green infrastructure we need. Most economists recommend a steadily rising carbon tax over time, and it must eventually be quite high.




First of all, the tax should be expanded to cover all industrial emissions, including process emissions (much of which are in the oil and gas sector) that currently go untaxed. They should also apply the tax to BC's exports of coal and natural gas (at least until importing jurisdictions have their own equivalent tax).


A redesigned carbon credit could be designed, for example, so that the bottom half of households would receive a credit that, on average, is larger than carbon tax paid (meaning, they would be net beneficiaries), while 80 percent of households would receive at least some amount. Under such an approach, the heavy lifting is accomplished by households with higher incomes – those who already have the largest carbon footprints. 

Third, we need to use carbon tax revenues to support complementary climate actions like building retrofits and public transit, as Metro Vancouver mayors have urged. Using the revenues to build the infrastructure we need for the 21st century would also support tens of thousands of new green jobs – far more than BC would see from building new fossil fuel infrastructure in the form of pipelines and LNG facilities.

Continuing with annual $5 increases would lead to a carbon tax of $50 per tonne by 2016. Expanded to cover all industrial emissions, it would raise over $2 billion per year. Applying the tax to exports could raise several billion more because BC's exported emissions from coal and natural gas are much larger than emissions within BC.

This is a win-win opportunity for BC. We can wean our economy and export profile off of polluting fossil fuels, create new jobs and be global climate leaders, fuelled by a progressive carbon tax system that reduces inequality as it raises the price of emitting greenhouse gases.

Marc Lee is senior economist with the CCPA-BC.