BC Gets a Carbon Tax

March 3, 2008

The government of British Columbia has implemented a carbon tax of $10 per tonne of carbon emissions, increasing to $30 per tonne by 2012. For gasoline, this works out to about 2.4 cents per litre. For home heating fuel about 2.8 cents. This is the first consumer carbon tax in North America.

If basic micro-economic theory holds true, this increase in price should lower the demand for fossil fuel, meaning less consumption. Intuitively, I would think that the demand for petroleum is quite inelastic in the short term, so it may be a while before a real reduction in emissions are realized.

But in the long term, this should result in people using more public transit, driving less and investing in more fuel efficient vehicles. Effectively, this tax should drive a change in behavior and attitude which is really what is needed to fight climate change.

As I understand it this tax is only applicable to consumers. Industry is except from this tax. However, I believe that in BC industry is required to participate in the carbon cap and trade system implemented within the Western Climate Initiative.

Canada’s environment minister, John Baird, has indicated that the federal government will not be following BC’s lead in this regard by implementing a federal carbon tax.

“We’re not looking at coming forward with one [carbon tax],” the federal environment minister said. “We’ve taken different approaches.”

If someone could explain to me what exactly those approaches are, I’d appreciate it.

Only time will tell if the carbon tax is effective in reducing green house gas emissions. An even larger question will be does it reduce emissions enough to make a difference?

But the fact remains that this is the boldest move by any North American government to address GHG emissions. British Columbia has set the bar for the rest of Canada and the US and for that they should be commended. Hopefully others will follow.

Posted in British Columbia, Canada, Environmental Policy