Business & Policy
B.C. Introduces Carbon Tax
By Dirk Meissner The Canadian Press
By Dirk Meissner The Canadian Press
Feb. 20, 2008, Victoria, B.C. — Finance Minister Carole Taylor introduced an escalating carbon tax on most fossil fuels Tuesday, one she says recycles revenues back to taxpayers and businesses and is designed to ignite an environmental social movement in British Columbia and across Canada to fight climate change.
And she's handing every British Columbian $100 in June as seed money to get them thinking green.
“This is an important turning point for British Columbia,'' she said. “We think for Canada.''
Taylor said she believes British Columbia is already at the forefront of an environmental movement in Canada.
British Columbia led Canada into the healthy lifestyles movement decades ago by choosing aerobics and granola over the beer fridge and living room couch, and the province now is ready to cut greenhouse gas emissions by driving less and walking more.
She said the budget attempts to balance the needs of fighting climate change while continuing to nurture a healthy economy.
“It is a budget that confronts and completely overturns the outdated notion that you have to choose either a healthy environment or a strong economy,'' Taylor said. “That either-or-thinking belongs to the past.''
She said the B.C. government has decided to tackle the climate change issue despite concerns from Ottawa about patchwork green solutions that include carbon taxes and cap-and-trade emissions deals like the one British Columbia and other provinces are exploring, including an agreement with California and five other western U.S. states.
“We had made the decision not to wait for a consensus,'' Taylor said.
Federal Finance Minister Jim Flaherty has said a variety of carbon taxes and greenhouse gas rules across the country isn't a good solution to Canada's environmental woes.
In Vancouver, last January, he said the country needs to work toward a common set of regulations aimed at reducing greenhouse gas emissions.
Quebec has already introduced a form of carbon tax last year but the revenues return to government green technology initiatives, not taxpayers. Taylor said the B.C. carbon tax is “among the broadest and most comprehensive taxes of its kind in the world.
“The carbon tax will start at a relatively low rate to give us all — businesses and individuals, time to adjust,'' she said. “As it rises, it will underline the fact that there is, indeed, a cost attached to generating greenhouse gases.''
The carbon tax , effective July 1, will be phased in over five years to give consumers and businesses time to adjust to the new tax and understand there is a cost associated with generating harmful greenhouse gases, she said.
The carbon tax will start at a rate based on $10 per tonne of carbon emissions and rise $5 a year to $30 per tonne by 2012, Taylor said. The tax works out to an extra 2.4 cents on a litre of gasoline, rising to 7.24 cents per litre of gasoline by 2012.
Taylor said the carbon tax on diesel and home heating oil will start at 2.7 cents per litre and increase to 8.2 cents per litre
over the same five-year period.
British Columbians already pay a 3.5-cent-per-litre gasoline tax to help fund transportation projects.
“We're not just going to be talking about climate change,'' said Taylor. “We are acting. This could be a social movement in British Columbia.''
Environmental groups supported the introduction of the carbon tax, saying it will spur investment into green technologies while reducing greenhouse gas emissions.
Business groups said they were bracing for a higher tax, with the Mining Association of British Columbia saying the tax needs work because industry will pay up to 70 per cent of the new carbon taxes.
Labour, health and education groups said the carbon tax hurts students, patients and low-income British Columbians.
But the David Suzuki Foundation said the carbon tax will spur development of green technologies and has the potential to make British Columbia an early leader in environmental initiatives.
“The government has used the most powerful tool, a carbon tax, to reduce greenhouse gas emissions,'' said Ian Bruce, a climate change specialist with the foundation.
“Green choices will become cheaper.''
The president of the Business Council of British Columbia, representing most of the province's large export companies, agreed the carbon tax will contribute to development of new environmental products.
“We view it as an opportunity to put an infusion of investment back into the economy where people can make their own decisions about how to spend their money,'' said business council president Virginia Greene.
Labour, health and education groups were not pleased with the green budget.
“It fell short on a lot of fronts,'' said Jim Sinclair, B.C. Federation of Labour president.
He said the government gave tax breaks to businesses and corporations without addressing the serious social issues of
homelessness and child poverty hurting the province.
Sinclair called the $100 climate dividend was an election stunt.
Health organizations said the government continues to move toward a market-style health-care system even though British Columbians support stronger public health care.
Education groups said there was nothing in the budget for students or to address the skills shortage facing B.C. industry.
Taylor said the carbon tax will be revenue neutral, meaning the government will not use money generated from the tax to fill its coffers. The carbon tax revenue, estimated to hit $1.8 billion over three years, will be returned to taxpayers through personal income tax and business tax cuts, she said.
The government will introduce legislation that requires it to table an annual plan that shows how the carbon tax revenue will be returned to taxpayers, Taylor said.
To coax British Columbians to start thinking green, the government will send every resident the one-time $100 Climate Action Dividend in June.
Lower income British Columbians will receive an annual Climate Action Tax Credit of $100 per adult and $30 per child to offset the cost of the carbon tax, she said.
Taylor said the carbon tax is one of the government's key building blocks to help it reach its legislated goal of reducing
British Columbia's greenhouse gas emissions by 33 per cent by 2020.
“We have to find a way that we can work towards improving our environment and at the very same time do it in a way that keeps our economy strong,'' she said. “One piece of the puzzle, not the whole story, is a carbon tax.''
The budget forecasts a $50 million surplus and annual growth of 2.4 per cent.
Taylor said the downturn in the U.S. economy will hurt the province's export and manufacturing industries, especially the
forest industry, but the provincial economy should remain strong due to strong trading relationships with Asia and robust provincial job growth.
The bottom two personal income tax rates will be cut by two per cent in 2008 and five per cent in 2009 on the first $70,000 in earning and, effective July 1, the corporate tax rate will drop to 11 per cent from 12 per cent.
As of July 1, the small-business tax rate will be cut from 4.5 per cent to 3.5 per cent.