National and international experts are coming to Vancouver to weigh in on a discussion spurred by Clark’s recent review of the BC's carbon tax. The objective for panelists and other experts this week is to determine how well the BC carbon tax is meeting its environmental objectives and how best to coordinate those objectives with economic growth objectives. Sustainable Prosperity and SFU’s Carbon Talks coordinated their efforts to air and share with the public the significant expertise and salient conversations that will be taking place on the state of BC’s climate policies in Vancouver this week. Moderated by Nancy Oleweiler, the panel session called BC’s Carbon Tax Shift: Is it Working, and What Next?
James Mack, the Director of BC’s Climate Action Secretariat, cited the significant benefits BC has seen from the carbon tax. These benefits range from lowering the rate of increase in BC gasoline sales, spurring carbon neutral government in 180 of 188 municipalities, requiring emissions monitoring in the public service and generating signals for the private sector to do the same. Senior Economist from European Environment Agency, Mikael Skou Andersen, noted “BC has one of the best designed carbon taxes in the world”. BC’s revenue neutral tax is a model to other jurisdictions such as the US and Australia who are considering similar action.
The boon of BC’s model is the commitment to revenue neutrality, which returns taxes to citizens and consumers in other ways. Currently this is done through income tax and corporate tax reductions, however political discussions about more innovative and visible ways to allocate this money is on the table. That the average citizen has barely noticed the tax benefit and that the greatest beneficiaries, rural and northern homeowners, are some of the greatest opponents have raised questions about how to garner greater public interest and support. Mack noted this as an example of where “economics and voting behavior part ways” while others suggest that more visible ways of recycling the tax base back to communities, in the form of green infrastructure for instance, may be what is required.
According to lawyer and economist, Stewart Elgie, BC is providing clear examples of how false the common dichotomy is between environment and economy. Detailed analysis shows that between 2008, the introduction of the carbon tax, to 2011, BC’s fuel consumption per person dropped 16% compared to the rest of Canada, while the economy remained above the Canadian average. While Elgie notes this drop is likely not all attributed to the carbon tax, his analysis shows decreases in the use of all fuel types in BC with the exception of aviation fuel. Interestingly, aviation fuel is not covered under the carbon tax which, he argues, may be indicative of the effectiveness of the carbon tax: other fuel types included under the carbon tax dropped, only 'exempted' aviation fuel increased.
Canada Research Chair, Nicholas Rivers, at Ottawa University released new modeling data that analyzes the anticipate impact of the carbon tax at the fuel pumps. Distinguishing from other factors that affect gas prices, Rivers and his team estimate that a carbon price of $30/ton the carbon tax is likely to reduce gas sales in the province by 7%; a considerable measure keeping BC on target to meet its emissions reductions objectives. He claims that taxes have strong influences on behaviour change in the long-run. The carbon tax sends noticeable and permanent signals to business and consumers spurring re-evaluation of how to use fuel more efficiently.
There are many issues that still need to be resolved relating to trade-exposed and carbon intensive industries such as cement in BC. Yet the resounding consensus was for the province to take even greater steps forward, to include all sectors and practices under the carbon tax, including those accounting for the remaining 30% of provincial emissions. It was agreed that when it is necessary to make a concession for a sector or industry in order for it to remain competitive, such as the greenhouse industry, compensations in the form of lump-sum payments could be made on an annualized basis. All economists on the panel cautioned against creating exceptions or exemptions from the tax arguing that greater inclusion results in reduced rates for all and also provides a greater incentive for even the most sensitive of industries to innovate.
Overall the Panel agreed that working in isolation to reduce global emissions is not beneficial for BC but made note that jurisdictions worldwide are not immune to the fact that the world is calling for a future that is green, clean and innovative. The Panel encouraged the notion that provincial leadership on the carbon tax is already being modeled. With greater persistence the province could push this leadership further by extending the carbon tax, finding innovative compensation arrangements for sensitive industries and sharing the in-coming evidence reported by this panel and others to convince other decision makers that environment and economy are not mutually exclusive but are and will continue to be intrinsically interconnected. BC can and should continue to demonstrate leadership and to provide the evidence necessary to fuel the transition toward a low carbon economy.