BC’s Revenue-Neutral Carbon Tax will work for Ontario

Reducing Emissions and Creating Jobs

The world has already warmed about 1 degree Celsius from greenhouse gases. Past CO2 (carbon dioxide) emissions commit us to another three quarters of a degree or so in the decades ahead.  Ultimately, global greenhouse gas emissions from human activities must be reduced by 60-90%.  Yet Canadian emissions continue to increase. The current Canadian government has committed to a 17% reduction in CO2 from 2005 to 2020. However, the expected 2020 value is expected to be close to the 2005 benchmark because the implementation of industry regulations is slow. See Canada’s Emission Trends, 2013, Environment Canada . Some politicians have questioned why Canada should act any faster, given that we produce only about 2% of the world’s CO2. For comparison, Canada’s contribution to the Second World War made up only about 2% of allied forces, but no one questions the importance of that contribution to the world!

We need more effective ways to reduce our carbon emissions. Fortunately, one such policy exists: a carbon tax which gives companies and individuals the incentive to reduce emissions. In short, we tax the things we don’t want (e.g., pollution) and use that money to lower taxes on things we do want (e.g., jobs).  A carbon tax is simple to administer and implement.

A cap-and-trade system, in contrast, is not. It requires a regulated “cap” on the total amount of carbon that can be emitted, and sells or – less desirably and more likely – gives away emissions permits to the big producers of carbon fuels. If a firm cannot meet its reduction target, it must buy (“trade”) permits from other firms that have not required all theirs.  The consumer helps pay the cost of the companies’ reduction in carbon emissions.  Many studies show that cap-and-trade is difficult to set up (and susceptible to industry manipulation, particularly in allocating permits) and covers less of the CO2 produced. See Congressional Budget office, 2008, Policy Options for Reducing CO2 Emissions.

Would a carbon tax work in Canada?  We have an excellent example in British Columbia, where – after only five months of planning – a carbon fee of $10 per tonne was introduced in 2005, rising $5/year to reach $30/tonne in 2009 or roughly 7 cents per litre of gas.  The revenue from the carbon tax went directly to reduce income and corporate taxes, creating jobs and investment. By 2012, carbon emissions in BC had fallen 17.4 % but had risen 1.5% in the rest of Canada. See Elgie and McClay, Canadian Public Policy 2013. Mr. Harper vilifies any form of carbon pricing as “job-killing taxes”, but the evidence from B.C. contradicts him:  over the same period, GDP fell 0.23% in the rest of Canada but only 0.15% in BC.  The effects on GDP to date in BC are similar to those European countries which have had a carbon tax in place for over a decade.2   Moreover, the move from fossil fuels to renewable energy has been shown to increase the number of jobs, not decrease it.  The carbon fee is preparing BC to compete successfully in the carbon-free world of the future.

Opinion polls show approximately 64% popular support for the carbon fee in BC.  A large part of this popularity is because the government returns all of the tax to its citizens, which results in lower income taxes for most BC taxpayers than in any other province, as well as a corporate income tax that is among the lowest in the G8.  Importantly though, people with the lowest incomes receive a grant to compensate for increased costs of heating fuel and transportation.

Given BC’s success, why are we not considering this now in Ontario? Indeed, it seems that politicians are most afraid of doing the smart thing: Canadian industry, including the Canadian Council of Chief Executives and the Canadian Association of Petroleum Producers, supports carbon taxes. The public wants action on climate change and the carbon tax is clean, simple, and effective. Ontario should follow BC’s example and show the federal government how to make effective climate policy.

Here are other articles we have published about Carbon Tax.

Stephen Hill, PhD, Professor of Environment and Resource Sciences, Trent University
and Alan Slavin PhD, Professor Emeritus Physics and Astronomy, Trent University
Republished with permission from the Winter 2014 Greenzine published by Transition Town Peterborough.   

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1 thought on “BC’s Revenue-Neutral Carbon Tax will work for Ontario”

  1. Thanks to the authors for this persuasive commentary!

    Citizens Climate Lobby promotes a “Fee and Dividend” program. Essentially it is a carbon tax, but avoids using “tax”, a negative word in the political environment of today. Funds collected by the carbon fee are returned to the public through a “dividend”.
    You can read more at http://www.citizensclimatelobby.ca/node/72.

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