Update on BC’s Effective and Popular Carbon Tax
Posted on 25 July 2013 by Andy Skuce
As reported previously, the tax remains popular in BC, with neither of the major provincial political parties having plans to scrap the tax and opinion polls show approximately 64% popular support for it. No doubt, part of the reason for the success is the revenue neutrality, which results in lower income taxes for most BC taxpayers than in any other province, even fossil-fuel-royalty rich Alberta. Repealing the tax would require personal and corporate income tax increases that would almost certainly be very unpopular.
“Revenue-neutral” does not mean—and could not mean—revenue neutral for every individual, it means revenue neutral for the government. People (and businesses) who create more emissions pay more carbon tax than average. The income tax rebates have been focussed on taxpayers earning less than C$117,000 per year, so gas-guzzling plutocrats would be net losers in BC .
Implications for policy makers
Roger Pielke Jr has declared, with some hyperbole, that:
The “iron law” thus presents a boundary condition on policy design that is every bit as limiting as is the second law of thermodynamics, and it holds everywhere around the world, in rich and poor countries alike. It says that even if people are willing to bear some costs to reduce emissions (and experience shows that they are), they are willing to go only so far.
BC has shown that a revenue-neutral carbon tax, set at C$30 per tonne of CO2-equivalent, can be both popular and effective. It is still unclear where Pielke’s boundary condition lies or if there is a boundary condition at all; in any case, it is clearly above $30 per tonne. The popularity of the policy is not because British Columbians, as the stereotype would have it, are all degenerate, pot-smoking lefties.
Well, we are not all lefties, anyway. In the 2011 national election, the percentage who voted for Stephen Harper’s Conservative Party was greater in BC than in Canada as a whole. The provincial government is the right-leaning BC Liberal Party that has won four elections in a row, with two of them since they introduced the carbon tax in 2008.
There are lessons from BC’s experiment that deserve to get the attention of anti-carbon-tax politicians in Ottawa, Washington, Canberra and elsewhere. Carbon taxes can work to reduce emissions without hurting the economy. And if they are designed correctly, they can even help leaders get re-elected.
Added: Prompted by the comments below, I have done some additional work to estimate the effect of cross-border shopping for fuel on BC's fuel consumption figures on my own blog Critical Angle.