Canada Unleashes First Carbon Tax in N. America

coal, power, energy, energy, emissions, carbon tax

[social_buttons] British Columbia will be the first in North America to institute a comprehensive carbon tax on nearly all fossil fuels. It’s a groundbreaking move that could prove the feasibility of taxing greenhouse-gas emissions.

Beginning July 1st, 2008, businesses and residents of British Columbia will be taxed $10 per metric ton of carbon emitted by fuels such as gasoline, diesel, natural gas, coal, propane, and home heating fuel. The tax will increase yearly by $5 per ton to $30 per ton in 2012, at which point the government will reevaluate the tax rate.

Nicholas Rivers, an economist at Simon Fraser University, commented that “The tax comes in slowly, ramps up over time, and uses the revenue in a neutral way to reduce other distortionary taxes in the economy, which is just what economists have been recommending for more than a decade.”

While pundits have argued that this would never happen in the US, the tax was received with little opposition by residents of British Columbia. Designed to be revenue-neutral, the tax will return all of the income generated ($1.85 billion over 4 years) in the form of tax cuts and environmental rebates, and it should have little impact on the economy or competitiveness.

Even with this new tax, BC’s finance minister Carole Taylor says that by 2010 British Columbia will have the lowest total combined corporate tax rate (25%) among the world’s economies.

Which just happens to be one of the criticisms of the tax—that it will hit residents harder than major industry (isn’t that usually what happens?).

While the increasing price of polluting won’t dramatically effect emissions immediately (only 5-10% decline), the National Round Table on the Environment and the Economy (NRTEE) forecast that if the price of CO2 rose to $200 per ton by 2050, Canada’s emissions would drop 60% below current levels over the next 40 years.

I’ve always thought this was a great idea because it’s a relatively quick way to generate a huge revenue stream for alternative energy while reducing greenhouse-gas emissions. Even if it bumped up the price of gas a few cents, I’m not sure anyone would notice at this point.

What do you think about carbon taxes? Vote in the poll I started on the GreenOptions Discussion forums: Are carbon taxes a good or a bad idea?

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Source: ES&T (Mar. 17 08): First comprehensive carbon tax in North America



In a past life, Clayton was a professional blogger and editor of Gas 2.0, Important Media’s blog covering the future of sustainable transportation. He was also the Managing Editor for GO Media, the predecessor to Important Media.