Carbon dioxide emissions are going up in British Columbia, despite the province having the highest carbon tax in Canada. According to a government document, taxpayers in British Columbia paid over $14 billion in carbon taxes while the province’s carbon dioxide emissions increased by 11 percent in four years—from 59.2 million metric tons in 2015 to 65.7 million metric tons in 2019. In 2021, B.C. taxpayers are expected to pay almost an additional $2 billion in carbon taxes.
According to the government report, B.C. emissions from road transportation increased 13 percent over the four years, with a 20 percent increase from light trucks and SUVs and a 16 percent increase from transport trucks. Carbon taxes are also increasing along with the emissions, making everything cost more, including groceries. In one part of B.C., gasoline prices went over $1.51 per liter ($5.72 per gallon Canadian or $4.74 per gallon U.S.).
The B.C. carbon tax is $45 per metric ton, costing about 10 cents per liter of gasoline and about 12 cents per liter of diesel. B.C. also has another hidden carbon tax that is even more expensive. It is a regulation that is part of the fuel standards and it drives prices up about 14 cents per liter of gasoline and 15 cents per liter of diesel. Combined, the two “taxes” cost about 24 cents per liter of gasoline and 27 cents per liter of diesel (around a dollar per gallon) and results in a tax that ups the cost to fill up a minivan by $18 and to fill up a light pickup truck by $29
The B.C. Carbon Tax
British Columbia’s carbon tax was adopted in 2008—the first in North America. The province’s carbon tax originally covered fossil fuel consumption by both households and industrial sources, which was a departure from carbon taxes in many countries that exempted politically influential industries. The carbon tax gradually increased from $10 per metric ton of carbon dioxide in 2008 to $30 per metric ton in 2012. The revenues from the tax were to be returned two ways: through low-income dividends — to avoid regressivity — and reductions in individual and corporate income tax rates.
Although the BC carbon tax applied originally to all sources and it was revenue neutral, its evolution over time changed. Revenues from $20 to $30 per metric ton were recycled via narrower tax credits, including for video game production and children’s sports fees. Fuels used by farmers were exempted. And the B.C. government made generous carbon tax concessions in order to secure investment in liquefied natural gas. The tax has become a political device, in practice.
In 2018, the carbon tax increased by $5 per metric ton and that $5 increase was supposed to continue each year until it reached the Canadian federal benchmark of $50 per metric ton. But, the increase in 2020 was waved due to the coronavirus pandemic. On April 1, 2021, however, it increased to $45 per metric ton and will reach the Canadian federal benchmark of $50 per metric ton on April 1, 2022. Revenues from tax increases above $30 per metric ton were to be used for more generous low-income tax credits and subsidies to support business transitioning from fossil fuels.
Some argue that higher carbon taxes would be more effective in decreasing carbon emissions, (for example, $80 or $100 per metric ton), and that energy industries such as metallurgical coal, natural gas and LNG sectors, should not get exemptions. While those sectors do pay carbon taxes, they have higher allowances for the amount that they can emit than other sectors. “Leakage” to countries with no or lower carbon pricing could result if carbon taxes are too onerous. If the carbon tax is too restrictive and constraining, there is a possibility that the energy intensive industries, like natural gas extraction, could leave the jurisdiction.
Other carbon reduction policies include cap-and-trade, which is a less transparent approach. Consumers do not see the carbon price directly as they do with a carbon tax, which is more visible, and therefore harder to sell to the public. The U.S. Congress attempted a “cap and trade” system which became known as “cap and tax” to reduce carbon dioxide during the first years of President Obama’s first term, but as it turned out, the United States led the world in carbon dioxide reductions without the system which was politically rejected.
The B.C. carbon tax did not reduce carbon emissions in the province in the four-year period from 2015 through 2019 despite consumers paying billions of Canadian dollars. The B.C. carbon tax started at $10 a metric ton in 2008 and has reached $45 per metric ton on April 1 of this year. It is expected to reach $50 per metric ton on April 1, 2022. The $45 tax adds about 10 cents to the price of a liter of gasoline and 12 cents to the price of a liter of diesel.