Earth Equity News

British Columbia's Carbon Tax Is Looking Like a Winner. Commentary by Stewart Elgie, Nic Rivers and Nancy Olewiler, Ottawa Citizen, July 27, 2010. "On July 1, 2008, B.C. embarked on an ambitious climate policy path; it brought in North America's first ever carbon tax shift. Though praised by environmentalists and economists, the measure was soon met by a host of concerns -- that it could increase overall taxes, decrease growth, and hurt low-income families. Some pundits labeled it political suicide, particularly after the resounding defeat of Stéphane Dion's "Green Shift" in the subsequent federal election. Two years later, it is possible to make a preliminary assessment of the tax, to see what lessons it may offer for the rest of the country, and the world. The result: B.C.'s policy experiment seems to be working...

"B.C.'s carbon tax has two parts. First, it puts a price on emissions of carbon -- the main greenhouse gas, which comes from burning oil, gas or coal. That cost is now $20/ton (it rises by $5 annually). Second, the revenues are all plowed back into tax cuts for individuals and business. What effects has this policy had so far? Although it is impossible to precisely identify the impacts of the tax shift in an economy with thousands of changing variables, initial results allay concerns that it would harm the economy. In fact, B.C.'s economic growth in 2009 -- the first full year the tax was in effect -- was higher than Canada's as a whole. Unemployment, although high because of wider economic events, is below the national average and does not appear to have jumped when the tax shift came in.

"Perhaps even more significantly, for the average taxpayer, the carbon tax shift has been an economic boon. During 2008 and 2009, the tax raised $846 million. However, the province tied the carbon tax to reductions in personal and corporate income taxes, as well as tax credits to offset impacts on low-income individuals. The total value of these offsetting cuts was nearly $1.1 billion over those two years, meaning a net tax reduction for B.C. taxpayers of about $230 million... The early results of B.C.'s carbon tax experiment are in, and they look positive. At a time when political leadership on climate change is sorely lacking, B.C. has stuck its neck out and done what most experts say is the right thing. Let's hope other governments -- in Ottawa, Washington and around the world -- are watching." Stewart Elgie is a professor of environmental law and economics at University of Ottawa. Nic Rivers is an economist and Trudeau Scholar at Simon Fraser University. Nancy Olewiler is a professor and director of the School of Public Policy at Simon Fraser University. All are members of Sustainable Prosperity.