British Columbia’s Carbon Tax is Working

A few weeks ago, the global powers that be wrapped up the climate summit (COP21) in Paris, coming out of it with a treaty that some say won’t be enough to prevent a global temperature rise of less than 2 degrees Celsius. That’s the level that climate scientists say we don’t want to exceed in order to avoid the worst impacts of climate change.

Whether or not the COP21 outcome is enough, successful examples of greenhouse gas (GHG) emissions reductions are already underway. British Columbia, the third most populous province in Canada, is one of them. The province enacted a carbon tax in 2008. How successful has the tax been? It decreased emissions 3.5 times faster than the rest of Canada, according to a new report by Carbon Tax Center (CTC).

British Columbia’s carbon tax began over seven years ago with the province’s Carbon Tax Act. It started on July 1, 2008 at $10 (Canadian) per metric ton of carbon and increased by $5 per ton in each of the following four years, reaching its current level of $30 per ton in July 2012. Its current level equals around $20.50 per U.S. short ton. CTC predicts that British Columbia’s emissions will continue to decrease.

The CTC report shows a 12.9 percent decrease in British Columbia’s per capita emissions from 2008 to 2013, compared to 2000 to 2007, while there was only a 3.7 percent decrease per capita for the rest of Canada during the same time period. “This suggests that the carbon tax caused emissions in the province to be appreciably less than they would have been, without the carbon tax,” the report's authors state.

Some critics of a carbon tax say it will harm the economy. The CTC report found that the carbon tax in British Columbia “does not appear to have impeded overall economic activity” in the province. 

An assessment released in May by environmental economists at Duke University and University of Ottawa also praised British Columbia’s carbon tax. The province “has given the world perhaps the closest example of an economist’s textbook prescription for the use of a carbon tax to reduce [greenhouse gas] emissions,” they wrote in their the assessment. Or, as the CTC report puts it, the carbon tax is the “most comprehensive and transparent carbon tax in the Western Hemisphere, if not the world.”

“The climate crisis is just that, a crisis. We need policy solutions that harness the power of price signals, and British Columbia’s carbon tax offers a promising example that other regions can and should adopt,” Charles Komanoff, director of the Carbon Tax Center and lead author of the report, said in a statement. “Not only do the numbers indicate that taxing pollution has been effective at curbing greenhouse gas emissions, but they highlight how politically feasible such a tax is, given that it has had no negative impact on economic growth.”

The tax is also modest. The final carbon tax rate, reached in July 2012, equates to only 20 cents (U.S. dollars) per gallon of gasoline. The tax increment is less than 6 percent of the pre-tax retail gas price in the province.

But from a political view, the tax “has been a solid success.” Opinion polls found that the number of residents who dislike the tax has decreased over time. The CTC found that the favorable reception is probably due to how the tax revenues are handled. The proceeds fund over a billion dollars a year of cuts in the province’s individual and business taxes. A tax credit adds aid to low-income households. And both provisions are “politically popular.”

The tax is catching on in other parts of Canada. In November, the province of Alberta announced that it is committed to enacting a carbon tax similar to British Columbia’s. Alberta’s carbon tax will start in 2017 at $20 per metric ton and increase in 2018 to $30, the current level of British Columbia’s tax.

Photo: Flickr/futureatlas.com