British Columbia’s pioneering carbon tax shift, passed in 2008, has been remarkably effective in reducing fuel use, with no apparent adverse impact on the province’s economy. These findings come from a new study by Sustainable Prosperity researchers to be published in the upcoming issue of Canadian Public Policy, a highly respected academic journal.
THE REPORT’S KEY FINDINGS ARE THAT:
• Since the carbon tax took effect (July 1, 2008), BC’s fuel consumption has fallen by 17.4% per capita (and fallen by 18.8% relative to the rest of Canada).
• These reductions have occurred across all the fuel types covered by the tax (not just vehicle fuel)
• BC’s GDP kept pace with the rest of Canada’s over that time
• The tax shift has enabled BC to have Canada’s lowest income tax rates (as of 2012).
• The tax shift has benefited taxpayers; cuts to income and other taxes have exceeded carbon tax revenues by $500 million from 2008-12.
Stewart Elgie, Professor of law and economics at University of Ottawa, and the report’s lead author, said: “BC’s experience shows that it is possible to have both a healthier environment and a strong economy — by taxing pollution and lowering income taxes.”
Canada’s premiers meet from July 24-26 to discuss a proposed Canadian Energy Strategy which includes “a more integrated approach to climate change”. Elgie commented: “I hope that BC’s success will inspire Canada’s premiers to show leadership on a national approach to pricing carbon pollution.”
- On 1 July 2008, BC brought in North America’s first carbon tax shift. It imposed a price on the use of carbon- based fuels, with all the revenues going to fund corresponding cuts in other taxes
- The tax is a central component of BC’s climate change strategy, which aims to reduce GHG emissions by 33 percent below 2007 levels by 2020
- BC’s carbon tax shift was designed to be “revenue neutral”; all the revenues are to be used to reduce other taxes – mainly through cuts to income taxes (personal and corporate), as well as targeted tax relief for vulnerable households and communities – resulting in no overall increase in taxation
- When introduced in 2008, the tax was initially set at $10 per tonne of carbon dioxide equivalent (CO2e). It was designed to rise by $5 per year thereafter until it reached $30 per tonne (roughly 7 cents per litre of gas) in 2012
To view research report: