CBC News covers our latest report, How to Adopt a Winning Carbon Price. Here’s the original article by Margo McDiarmid.
If you want to bring in carbon tax that actually works, the folks at Clean Energy Canada have some helpful tips for you.
Such as: don’t introduce the new tax during the time of year when gas prices are the highest; and be prepared that a lot of people and businesses won’t love the idea and won’t be afraid to say so.
Clean Energy Canada, a think-tank that focuses on clean renewable energy, conducted interviews with 13 people involved in crafting British Columbia’s carbon tax in 2008, a list that included politicians, business representatives, academics and environmental groups.
“We wanted to get a look behind the curtain and find out how do you do something like this,” said Clare Demerse, the author of the report that came out of those studies.
The result is a report on the lessons learned about pricing pollution — a concept that still scares many politicians.
B.C.’s carbon tax a first
B.C. was the first jurisdiction in North America to introduce an economy-wide price on carbon. It has since become viewed internationally as a textbook example of how to introduce a carbon price that can actually work.
Now into its seventh year, the policy is fully implemented. The province has met its targets to cut greenhouse gas pollution and the economy is humming along with another budget surplus this year.
“Now I’m not saying it’s because of the tax, but it means the tax has not held them back,” said Demerse, who is senior policy adviser with Clean Energy Canada.
The group’s report comes amid a growing debate in Canada over how to control carbon pollution.
The federal NDP, for example, supports a national cap and trade system like the one now operating in Quebec.
Liberal Leader Justin Trudeau recentlyproposed a national carbon pricing planthat he compared to medicare, in which Ottawa would set national targets and enforce principles, but leave provinces to design their own systems.
The federal Conservatives have consistently called a carbon tax a job-killing tax on everything. Last December, Prime Minister Stephen Harper told the House of Commons it was a “crazy” idea.
Not for the faint of heart
But Demerse said that hasn’t been the experience in B.C.
“The carbon tax has become institutionalized in B.C. where no one is talking about getting rid of it,” she said in an interview.
That doesn’t mean it hasn’t been difficult. In fact, a main takeaway from the report is a carbon tax is not for the faint of heart.
B.C.’s carbon tax covers nearly 70 per cent of the province’s carbon pollution that comes from burning coal, oil or natural gas.
It started out at $10 for every tonne of carbon and has increased to $30 a tonne. It is levied on fuel wholesalers, who pass it on to retailers, who pass it on to consumers. The idea is to encourage people and businesses to change their habits and choose cleaner fuels.
Gas prices in B.C. are now seven cents a litre higher because of the tax.
But the report says the simple, gradual approach at the beginning has helped the tax succeed.
“$10 a tonne was chosen because it was low enough to be non-threatening,” the report notes.
Another the key is that the tax is revenue neutral — every dollar collected has to be returned to residents and businesses through tax cuts.
In fact, the provincial finance minister has to take a 15 per cent pay cut if the tax is not revenue neutral in every budget.
Businesses liked that idea and in turn supported the tax. But it’s also become B.C.’s biggest challenge when it comes to voters.
Many people didn’t trust it and still don’t understand it, said Demerse.
One problem was probably the timing. B.C. politicians laugh about it now, Demerse says, but the initial carbon tax was introduced on July 1, 2008, the time of year when the price of gas is the highest and people drive the most.
Another problem was that “a huge number of voters said ‘I just don’t believe it is actually revenue neutral,’ it didn’t convince them that the government said it,” she said.
Partly that is because people don’t get a cheque back in the mail, she says. Instead they get a tax credit once a year, which many don’t notice.
One result of this is that the province has had to bring new exemptions to the tax, such as providing an annual $200 benefit for northern and rural homeowners who felt they were being hit hard by the increased cost of fuel.
Demerse said she considers it a lesson for any other jurisdiction thinking of doing the same thing.
“You can’t just announce it and one day, put up a couple of people to speak to it and then go away,” she said. “You are going to be explaining this and defending this for a long time.”