B.C. now has the lowest per capita fuel use of any province in Canada, passing Ontario, which was consistently ahead of B.C. for low fuel use before the introduction of the carbon tax, according to the study, titled British Columbia’s Carbon Tax Shift: Its Effects after Four Years. The report, which examines the impact of the policy as it marks its four year “anniversary” on July 1st, found that between 2008 and 2011, per capita use of petroleum products, such as gasoline and propane, dropped 15.1% in B. C. During the same period, there was a 1.3% increase in fuel use across the rest of the country.
As well as having a positive impact on the environment, concerns that the tax shift might harm the economy are unfounded, according to the new study. The latest data suggests there has not been any negative impact on GDP since the tax shift was introduced in 2008, which is in line with evidence from other countries that have brought in similar policies. British Columbia’s economic growth per capita has remained relatively constant during the period that the tax has been in place, even in the face of the global financial crisis.
The carbon tax shift has, in fact, benefitted the economy in many ways: Companies, organizations and individuals have been spurred on by the policy to invest in renewable energy and energy efficiency, which has helped to “decouple” the BC economy’s growth from fossil fuel use. Because it has allowed for other taxes – particularly corporate and income tax rates – to be cut – which is what the “shift” refers to – the policy has also put BC in the enviable position of having some of the lowest tax rates in North America.
Professor Stewart Elgie, the report’s lead author, said: “British Columbia’s decision to introduce a carbon tax shift in 2008 was a courageous and far-sighted one. Our study shows that the decision was also a wise one, inasmuch as the tax shift has delivered real environmental benefits to the province, even as the BC economy has continued to grow. Moreover, by “decoupling” its economic growth from fuel consumption, the province is making itself less vulnerable to the volatility of fossil fuel prices, and it has created a fiscal advantage for itself through reduced personal and corporate income cuts.”
Sustainable Prosperity will be conducting further research on the impact of B.C.’s carbon tax shift on specific sectors in order to better understand the impact of the policy on consumer and industry choices when it comes to fuel use.
MEDIA CONTACT
Jennifer Wesanko
jwesanko@sustainableprosperity.ca
604-347-5988
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BACKGROUND
On July 1, 2008, B.C. brought in North America’s first carbon tax shift. The policy was designed to cut greenhouse gas emissions and to reduce fuel use through a price on carbon.
When the tax was introduced, the price was set at $10/tonne of carbon dioxide (2.4 cents per litre for gasoline). Each year, the level has increased by $5/tonne (about 1 cent per litre). It will rise to $30/tonne on July 1, 2012 ($6.67 cents per litre). The provincial government is reviewing whether to increase the level again in 2013.
B.C.’s carbon tax shift is a central component of the province’s climate change strategy. The province aims to reduce its GHG emissions by 33% below 2007 levels by 2020. The tax applies to 77% of the province’s emission from residential, commercial and industrial sources (it does not cover emissions from non-combustion sources, such as landfill methane emissions, fugitive emissions, and certain industrial processes). The charge for each fuel type is calibrated to the amount of carbon released by burning it.
Sustainable Prosperity has been tracking the impact of the B.C. carbon tax shift since it was introduced in 2008. In keeping with the objectives of the policy, this new report focuses primarily on the carbon tax shift’s environmental effectiveness, in other words, how it has reduced emissions. It also examines its economic and fiscal impact.
Although GHG emissions data is reviewed, the report concentrates on analysis of fuel use, as this provides a more current and accurate picture of the effects of B.C.’s carbon tax shift. Change in fuel use is a particularly informative measure as fuel use data is available up until spring 2012, whereas GHG emissions data is available only up until the end of 2010. Also, data on fuel use can be readily broken down to focus only on the types of fuel that are subject to tax (data on GHG emissions cannot be broken down).
The study concludes that the carbon tax is a significant factor in the reduction of fuel use in the four years since the policy has been in place.
When the tax shift was introduced, most Canadians (70%) considered it to be a positive step, according to a poll by the Pembina Institute, a Vancouver-based think tank. However, a 2008 poll by Ipsos showed that the majority of British Columbians (59%) opposed the policy. After the first year of the tax, it was more popular, with 48% of British Columbians supporting it and 47% opposed . By 2011, 59% of British Columbians supported the carbon tax, an “all-time high,” according to the polling firm Environics. This suggests British Columbians are becoming more comfortable with the tax.
A study released this week by the Pembina Institute and Energy and Materials Research Group at Simon Fraser University, based on 39 interviews with B.C. businesses, non-governmental organizations, academics and community leaders, shows the majority of those surveyed think the carbon tax policy has been positive for the province. According to the study, British Columbia’s carbon tax: Exploring perspectives and seeking common ground, a large majority (64%) said the carbon tax had positive consequences for the province, while only 18% believed the policy has had a negative effect. There was a consensus on the need for a carbon tax and other government initiatives to minimize the serious impact of climate change on B.C.’s environment and economy.
