British Columbia in Canada

By Stewart Elgie, Professor of Law & Economics at University of Ottawa and seat of lasting Prosperity; Ross Beaty, Chairman of Pan-American Silver Corp. and Alterra energy; and Richard Lipsey, Professor Emeritus of Economics at Simon Fraser University.

We quite often hear statements that a carbon income tax would destroy jobs and growth. The proof from a Canadian province that passed such a tax – British Columbia – tells a really various tale.

The newest numbers from Statistics Canada reveal that B.C.’s policy has been a real ecological and financial success after six years. Definately not a “job killer, ” its a world-leading illustration of how to deal with one of the biggest international challenges of your time: building an economy which will prosper in a carbon constrained world.

Implemented on July 1, 2008, B.C.’s income tax covers many types of gas use and carbon emissions. It started off reasonable (C$10 per tonne of co2), then rose by C$5 each year, reaching C$30 per tonne currently (about 7 cents per litre of fuel). "income natural" for legal reasons, the insurance policy needs equivalent cuts to other fees. In practice, the province has cut 0 million even more in earnings as well as other taxes than needed seriously to counterbalance carbon tax revenue.

The outcome: taxpayers have recently come out forward. B.C. now has got the least expensive individual tax rate in Canada (with additional slices benefiting low-income and outlying residents) and something of this cheapest business rates into the OECD. You don’t need an economist and a mining business owner to share with you that’s good for company and tasks.

At exactly the same time, it's already been extraordinarily efficient in tackling the root cause of carbon air pollution: the burning of fossil fuels. Since the income tax came in, gas use in B.C. features fallen by an impressive 16 per cent (counting all fuels covered by the tax). To place that success in point of view, Canada’s Kyoto target was a 6 percent reduction in two decades.

And also the research things into carbon tax given that significant driver of this modification. B.C.’s big fall in gasoline usage …

• Had not been as a result of the global downturn in the economy. Various other provinces in addition went through that, yet their gas use moved up by 3 per cent from 2008-13.
• Was not because cross-border gas purchasing. Two scientists (the Sightline Institute and Andy Skuce) have actually estimated this aspect probably makes up about just 1-2 percent of B.C.’s 16 % decrease in fuel usage since 2008. Furthermore, B.C. outpaced the remainder of Canada (by loads) on all sorts of gasoline subject to the income tax since 2008. (and folks didn’t take their house heating oil tanks across the border!).
• Was not because a pre-existing trend. From 2000-08 B.C.’s fuel usage had been actually rising by 1.1 percent/year relative to the rest of Canada; after 2008 it dropped by 4 percent/year.
  

Further, though some had predicted the taxation move would hurt the province’s economy, in fact B.C.’s GDP per capita features a little outperformed the others of Canada’s since 2008.

With these impressive outcomes, B.C.’s carbon tax has gained widespread global compliments as a model the world – from places such as the OECD, the World Bank, and The Economist. But within Canada (outside B.C.) it's less heralded, which is a shame. Because when you appear beyond the governmental rhetoric and examine the facts, B.C.’s experience provides effective, good classes for the world.