A Carbon Tax that Works

March 30, 2014

Chris Mooney in The Atlantic:

A carbon tax is just what it sounds like: The BC government levies a fee, currently 30 Canadian dollars, for every metric ton of carbon dioxide equivalent emissions resulting from the burning of various fuels, including gasoline, diesel, natural gas, and, of course, coal. That amount is then included in the price you pay at the pump—for gasoline, it’s 6.67 cents per liter (about 25 cents per gallon)—or on your home heating bill, or wherever else the tax applies. (Canadian dollars are currently worth about 89 American cents).

If the goal was to reduce global warming pollution, then the BC carbon tax totally works. Since its passage, gasoline use in British Columbia has plummeted, declining seven times as much as might be expected from an equivalent rise in the market price of gas, according to a recent study by two researchers at the University of Ottawa. That’s apparently because the tax hasn’t just had an economic effect: It has also helped change the culture of energy use in BC. “I think it really increased the awareness about climate change and the need for carbon reduction, just because it was a daily, weekly thing that you saw,” says Merran Smith, the head of Clean Energy Canada. “It made climate action real to people.”

It also saved many of them a lot of money. Sure, the tax may cost you if you drive your car a great deal, or if you have high home gas heating costs. But it also gives you the opportunity to save a lot of money if you change your habits, for instance by driving less or buying a more fuel-efficient vehicle. That’s because the tax is designed to be “revenue neutral”—the money it raises goes right back to citizens in the form of tax breaks. Overall, the tax has brought in some $5 billion in revenue so far, and more than $3 billion has then been returned in the form of business tax cuts, along with over $1 billion in personal tax breaks, and nearly $1 billion in low-income tax credits (to protect those for whom rising fuel costs could mean the greatest economic hardship). According to the BC Ministry of Finance, for individuals who earn up to $122,000, income tax rates in the province are now Canada’s lowest.

So what’s the downside? Well, there really isn’t one for most British Columbians, unless they drive their gas-guzzling cars a lot. (But then, the whole point of taxing carbon is to use market forces to discourage such behavior.) The far bigger downside is for Canadians in other provinces who lack such a sensible policy—and especially for Americans. In the United States, the idea of doing anything about global warming is currently anathema, even though addressing the problem in the way that British Columbia has done would help the environment and could also put money back in many people’s pockets. Such is the depth of our dysfunction; but by looking closely at British Columbia, at least we can see that it doesn’t have to be that way.

Thus, the carbon tax survived an initial trial by fire, and the opposition softened. After all, after a few years with the tax in place (and the resulting tax cuts for BC residents getting larger and larger), any repeal of the policy would amount to a highly unpopular tax increase. “The party that I represent opposed the legislation at the beginning, and we’ve changed our point of view now to embrace it,” says Spencer Chandra Herbert, a British Columbia legislator from the New Democratic Party who is the official opposition voice on environmental issues. “And we’re actually raising questions about what’s next.”

The tax has actually become quite popular. “Polls have shown anywhere from 55 to 65 percent support for the tax,” says Stewart Elgie, director of the University of Ottawa’s Institute of the Environment. “And it would be hard to find any tax that the majority of people say they like, but the majority of people say they like this tax.”

It certainly doesn’t hurt that the tax, well, worked. That’s clear on at least three fronts: Major reductions in fuel usage in BC, a corresponding decline in greenhouse gas emissions, and the lack of a negative impact on the BC economy.



13 Responses to “A Carbon Tax that Works”

  1. […] Chris Mooney in The Atlantic: A carbon tax is just what it sounds like: The BC government levies a fee, currently 30 Canadian dollars, for every metric ton of carbon dioxide equivalent emissions re…  […]

  2. […] “ Chris Mooney in The Atlantic: A carbon tax is just what it sounds like: The BC government levies a fee, currently 30 Canadian dollars, for every metric ton of carbon dioxide equivalent emissions re…”  […]

  3. kap55 Says:

    A big congratulations to BC for sensible action on climate change.

    • ubrew12 Says:

      They are leading. Something Americans used to know how to do.

      • Indeed, Americans used to do that.

        Then we got a bunch of “regulators” in various agencies whose mission appeared to be to make perfect the enemy of “good enough”.  Take California’s ZEV mandate as an example.  It explicitly gave no credit for hybrids or PHEVs, and required a performance standard well beyond what the batteries of the day could supply.  Every time things got close, the mandate was revised to put the goal further out of reach.  Even the promotional push to let ZEVs use HOV lanes had a time limit.  People had been building PHEVs since the 1970’s, but the benefits were never given credit so they achieved no commercial success until just recently.

        Same thing with nuclear energy.  It is carbon-free and emits only tiny amounts of radioactives in normal operation, but it was regulated nearly out of existence because of “safety” concerns while radon in natural gas and every sort of naturally-occurring radioisotope in coal was given a free pass.

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