B.C. takes important lead with carbon tax

The Canadian province of British Columbia announced yesterday that it will introduce a carbon tax that will apply to nearly all fossil fuels sold in the province, including gasoline and home heating fuel. The tax will start at $10 (Canadian) per tonne of carbon emissions in 2008 and be increased by increments of $5 annually over the next few years until it reaches $30. The tax will be complemented by a carbon cap-and-trade system that will be introduced as part of B.C.’s alliance with several U.S states and Canadian provinces.

Finally: Leadership.

The province said the tax will be revenue-neutral. About $1.8 billion raised from the tax over the next three years will go toward personal income and business tax cuts. A $100 climate action dividend will also be given to citizens once a year, with the idea being that the money saved from income-tax cuts and returned through the dividend will go toward conservation and improving energy efficiency. Citizens will also get more tax breaks for purchasing fuel-efficient vehicles and appliances.

Now, I should point out that Quebec introduced a carbon tax last year, but the money collected from it goes back to the government and is eventually targeted at green technology initiatives. It’s not clear to me whether this approach is more effective or not. I like the idea of a revenue-neutral tax that benefits people who reduce their environmental footprint and penalizes those who increase it, but an income tax cut needs to come with some strings attached or at least some kind of program that encourages investment of those savings into energy efficiency and renewables.

What I like about B.C.’s approach — and Quebec’s before it — is that they’re ignoring the rhetoric coming out of our federal government that a carbon tax will hurt the economy. The Conservative government of Stephen Harper has consistently dismissed the idea of introducing a national carbon tax, and has warned against burdening business with a patchwork of provincial rules and carbon taxes.

The B.C. government’s response: “We made the decision to not wait for consensus.”

Consensus is the killer. Consensus is what the United Nations is about, and all the international climate meetings that lead to nothing. Consensus is a tool of delay. It’s nice to see a government realize that breaking away from the pursuit of consensus is what Canadians — and I venture to argue most Americans — truly want. B.C. Premier Gordon Campbell said he won’t pressure other provinces to follow, but he hopes that B.C.’s move will demonstrate to others that it’s the right move and that it will create economic opportunities.

So do I. The fact is, a carbon tax is the quickest and most efficient way to influence change in the market. Cap-and-trade, while effective if designed properly, in my view should only be considered afterward as a complement. The problem with cap-and-trade is that it’s complicated and tends to reward lawyers, accountants and bureaucrats the most.

My only reservation about B.C.’s carbon tax? While it is expected to hit 70 per cent of all greenhouse gas emission sources in the province, the tax won’t immediately apply to industry and power producers, including oil/gas industry and cement makers. The province argues it needs more time to figure out a proper model. I think this is a mistake — if a government wants its citizens to accept a tax on personal consumption they have to show they’re equally ready to apply the same rules to industry.

That said, here’s hoping that the decision to impose carbon taxes in Quebec and now B.C. will infect other parts of the continent. Mr. McGuinty, now is the perfect time for Ontario to step up to the plate.

As for the feds, here’s hoping the White House and Parliament Hill wake up and realize this is real, and that now is the time to harmonize with the provinces and states that appear leap years ahead.