{"id":267378,"date":"2019-07-11T10:30:08","date_gmt":"2019-07-11T14:30:08","guid":{"rendered":"https:\/\/policyoptions.irpp.org\/issues\/lessons-from-british-columbias-carbon-tax\/"},"modified":"2025-10-07T22:36:23","modified_gmt":"2025-10-08T02:36:23","slug":"lessons-from-british-columbias-carbon-tax","status":"publish","type":"issues","link":"https:\/\/policyoptions.irpp.org\/fr\/2019\/07\/lessons-from-british-columbias-carbon-tax\/","title":{"rendered":"Lessons from British Columbia\u2019s carbon tax"},"content":{"rendered":"

British Columbia\u2019s carbon tax, adopted in 2008, was celebrated internationally as a textbook model<\/a> of carbon taxation. The province\u2019s even-handed coverage of fossil fuel consumption by both households and industrial sources was a departure from carbon taxes in other countries that exempted politically influential industries. The schedule of tax increases from $10\/tonne of CO2<\/sub> in 2008 to $30\/tonne in 2012 was gradual and predictable, as recommended by policy experts. All revenues from the tax were to be returned two ways: through low-income dividends \u2014 to avoid regressivity<\/a> \u2014 and reductions in individual and corporate income tax rates, to deliver spillover economic benefits.<\/p>\n

Implementation of BC\u2019s landmark carbon tax reflected a confluence of factors. Polls in 2007 indicated that the environment and climate change were at the top of Canadian voters\u2019 agenda, prompting diverse policy proposals from provincial and national governments. The business community thus anticipated that increased costs would be forthcoming, not least given growing interest in cap-and-trade in both the US and Canada. When consulted by a trusted right-of-centre BC government in late 2007, business representatives indicated<\/a> that they could live with a carbon tax if the burden of reductions was shared with households and the tax was revenue-neutral. A final critical factor was leadership by Gordon Campbell, premier at the time, who developed a strong personal interest in climate change and was willing to embrace advice that a carbon tax was the most straightforward and cost-effective policy option. Campbell\u2019s government announced in its February 2008 budget that a new carbon tax would take effect that July.<\/p>\n

Survival was by no means guaranteed. When unrelated increases in gasoline prices in the spring of 2008 created growing public unease, the opposition NDP mounted an opportunistic \u201caxe the tax\u201d campaign. Public support fell for the BC Liberals and increased for the NDP, bringing the parties neck and neck by the fall. However, despite nervousness in the Liberal caucus, Campbell stayed the course.<\/p>\n

Thereafter, the carbon tax was saved by a decline in the price of gasoline and the onset of the global recession, which redirected voters\u2019 attention from gasoline prices to the economy, an issue on which voters favoured the Liberals over the NDP by a 30-point margin in polling at the time. In the 2009 election, the Liberals campaigned on sound management of the economy, barely mentioning the carbon tax until Campbell proudly highlighted it in his election-night victory speech.<\/p>\n

The next survival challenge was loss of the policy\u2019s champion. Campbell was succeeded as Liberal leader and premier by Christy Clark in 2011. Public support for the carbon tax had rebounded above 50 percent in 2011, eventually reaching 64 percent in 2012<\/a>. However, opposition had grown in the business community, as other national and provincial carbon pricing proposals were shelved, leaving BC isolated with its $30\/tonne tax. The Clark government announced a review of the carbon tax in 2012, but ultimately opted only to freeze the rate at $30\/tonne until other jurisdictions caught up.<\/p>\n

As one of four provinces that laid the foundation for the Trudeau government\u2019s decentralized approach to carbon pricing, BC would be able not only to maintain its preferred strategy of carbon taxation, but also to benefit from the levelling of the playing field. It thus seemed surprising when Christy Clark was one of the last holdouts in negotiation of the Pan-Canadian Framework on Clean Growth and Climate Change in 2016. Clark\u2019s reservations reflect the fundamental challenge of reconciling price- and emissions-based approaches, in particular that the resulting carbon price and thus costs to provincial economies might be lower in provinces that opt for cap-and-trade plans compared with those that commit to meet the federal benchmark price of $50\/tonne via carbon taxes. Clark signed on<\/a> only after securing agreement to an interim review of the pan-Canadian framework in 2020, the year in which BC would have to increase its tax, according to the benchmark schedule.<\/p>\n

In the 2017 BC election, the Liberals maintained that they would not increase the carbon tax, contrary to their own Climate Leadership Team\u2019s recommendation. In contrast, both the NDP, which abandoned its opposition to the carbon tax in 2011, and the Green Party proposed increases. The election yielded an NDP minority government supported by three Green MLAs. The two parties agreed to increase the carbon tax by $5\/tonne starting in 2018, reaching the $50\/tonne federal benchmark one year earlier than the pan-Canadian framework deadline. Revenues from increases above $30\/tonne are earmarked for more generous low-income tax credits and subsidies to support business transition from fossil fuels.<\/p>\n

The BC carbon tax offers a number of lessons, both positive and negative. A growing body of research has found that the BC carbon tax reduced consumption of gasoline<\/a> and residential natural gas<\/a> as well as overall emissions<\/a>. It also prompted greater uptake of fuel-efficient vehicles<\/a>, all without loss of jobs<\/a> or harm to low-income households<\/a>. However, while BC\u2019s emissions are lower than they would have been without the carbon tax, the fact they have only levelled off underscores that either a higher carbon price or more aggressive complementary measures are needed to achieve the absolute reductions in emissions.<\/p>\n

The BC experience also offers cautionary lessons about the politics of carbon taxes. Public misunderstanding of how environmental taxation works, combined with the visibility of costs and lower visibility of benefits, renders carbon taxes ripe for populist attacks. The BC NDP\u2019s opportunistic axe-the-tax campaign relied on rhetoric that has since been echoed in other provinces, nationally and internationally: highlighting the most salient price increase, which is on gasoline in the Canadian context; questioning or ignoring corresponding revenue returns via tax cuts or dividends; and falsely asserting that carbon taxes are unfair to \u201cworking families\u201d while \u201cbig polluters\u201d are being let off the hook. More recently, Conservative opponents have also insisted that carbon taxes don\u2019t work<\/a> and kill jobs<\/a>, despite strong evidence to the contrary from BC. Although BC stayed the course and will increase its tax to $50\/tonne in line with the pan-Canadian framework, it is striking that the province\u2019s ambitious 2018 climate plan<\/a> does not rely on further increases to the carbon tax.<\/p>\n

Although the BC carbon tax\u2019s even-handed application to all sources and its revenue neutrality via income tax cuts were celebrated in 2008, its evolution over time illustrates the temptation to use revenues for political gain. After the first three years of income tax cuts, revenues from $20 to $30\/tonne were recycled via narrower tax credits<\/a>, including for video game production and children\u2019s sports fees. Fuels used by farmers were exempted. More significantly, both the Liberal<\/a> and NDP<\/a> governments made generous carbon tax concessions in attempts to secure investment in liquified natural gas.<\/p>\n

There are, however, positive lessons as well. Public support for the carbon tax\u00a0bounced back after three years\u00a0and remains strong, though that doesn\u2019t necessarily indicate support for\u00a0significantly\u00a0higher\u00a0tax rates. The resilience of the BC tax is also noteworthy. Whether or not it is revenue-neutral, repealing a carbon tax leaves\u00a0a\u00a0hole in a government\u2019s budget\u00a0that\u00a0typically\u00a0will need to be filled by\u00a0increasing\u00a0another tax,\u00a0potentially rekindling anger\u00a0among\u00a0voters\u00a0just as they\u00a0have\u00a0gotten used to\u00a0the carbon tax.<\/p>\n

Going forward,\u00a0BC\u00a0has\u00a0earmarked\u00a0its carbon tax revenues\u00a0above $30\/tonne\u00a0rather than maintaining revenue\u00a0neutrality. It will be\u00a0interesting to see whether\u00a0British Columbians embrace\u00a0that strategy, of which industry is the immediate beneficiary, or come to resent that they are not receiving\u00a0the\u00a0tax credits<\/a>\u00a0enjoyed by\u00a0Canadians in provinces\u00a0subject to the federal tax.<\/p>\n

This article is part of the\u00a0The evolution of carbon pricing in the provinces<\/a>\u00a0special feature.<\/strong><\/p>\n

Photo:\u00a0Shutterstock, by\u00a0EB Adventure Photography<\/a><\/span><\/p>\n

\n

Do you have something to say about the article you just read? Be part of the\u00a0<\/em>Policy Options\u00a0discussion, and send in your own submission.\u00a0Here is a\u00a0<\/em>link<\/em><\/a>\u00a0on how to do it. <\/em>|\u00a0Souhaitez-vous r\u00e9agir \u00e0 cet article ? <\/em>Joignez-vous aux d\u00e9bats d\u2019<\/em>Options politiques\u00a0et soumettez-nous votre texte en suivant ces\u00a0<\/em>directives<\/em><\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

British Columbia\u2019s carbon tax, adopted in 2008, was celebrated internationally as a textbook model of carbon taxation. The province\u2019s even-handed coverage of fossil fuel consumption by both households and industrial sources was a departure from carbon taxes in other countries that exempted politically influential industries. 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