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The Fate of BC's Carbon Tax

by Eric de Place

What Canada's tax shift means for the U.S.

British Columbia's recent carbon tax made waves in the US. (more here, here, and here.) But it's not terribly popular in BC, as economist Marc Lee of the Canadian Centre for Policy Alternatives explains:

While there are plenty of good reasons why the Liberals should get beaten up at the polls, one of the key reasons for the change is the carbon tax, due to an aggressive (if questionable) campaign by the NDP and poor communications by the government.
In some public opinion work I’ve seen, two messages about BC’s carbon tax come out loud and clear. The first is that revenue neutrality is a bust — people may be willing to live with a new tax on carbon but think that giving the money back is a dumb idea; they would rather have revenues spent on public transit or anything else that would reinforce climate action. Second, they want tough action on industry.

Quick aside for American readers who may not follow Canadian politics: the Liberals are the right-of-center party that is currently in power in BC; they're the ones responsible for the provincial carbon tax. The NDP -- the New Democratic Party -- is the left-of-center opposition party, which has criticized the carbon tax. And yes, you heard that correctly: the right is proposing a carbon tax and the left is attacking it.

Confusingly, although the BC Liberals and the federal Canadian Liberals are different parties with different orientations and platforms, their fates may be wedded in the next election -- because the national party has also proposed a carbon tax. At the federal level, however, the Canadian Liberals are the opposition party; the national government is controlled by the Conservative Party.

Got that? Okay, so here's what Canada's carbon taxes may mean for the rest of North America...

According to Marc, in addition to the political difficulty of levying a carbon tax, there's a public perception problem with revenue-neutral tax-shifting, at least in BC. This is concerning to folks like me who think that revenue-neutral tax-shifting is an excellent idea on substantive policy grounds. For instance, Sightline tends to favor cap and rebate and cap and dividend approaches to climate policy -- policies that put a price a carbon but return a significant portion of the revenue to taxpayers.

But whatever the policy merits, the political will appears fragile. As Marc notes:

If both the federal and BC Liberals lose elections on the basis of the carbon tax, it would take carbon taxes off the table for all of North America, potentially forever.

I think Marc's right that it will be extremely informative to watch how Canadian (and British Columbian) politics play out over the next few months. Still, I'm not quite as bearish. In fact, I think revenue-neutral carbon taxes are actually gathering steam in the US. To my mind, carbon taxes are second-best to auctioned cap and trade, but they're still a very valuable tool.

In the meantime, policy wonks should keep an eye on the Progressive Economics Forum blog. We don't always see eye to eye on some climate policy issues, but it's home to reliably good thinking.

This piece originally appeared on the Sightline Institute's blog, The Daily Score.

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So far, I'd say that the Canadian experience shows the big obstacle facing a "revenue neutral" carbon tax is convincing individual voters that the tax will be revenue neutral for them. Tax switching can produce winners and losers. The opposition in BC and in Canada as a whole seems to be that individual people or communities are suspicious that they will pay higher taxes (and someone else will get a break). Accompanying policies -- rebates, other incentives, etc. -- can level the field for those segments disproportionately affected by a tax shift. Those policies need to clearly explained and promoted to win the public's favour.

Posted by: Simon D on 8 Sep 08

A lot of people are also concerned (rightfully so, perhaps) that the increased costs of transportation and industry will be passed on to the things people need - so the cost of food will go up, for instance. These are the kinds of things that can't be accounted for by revenue neutrality.

Ultimately, though, opposition to the tax seems to stem from a lack of understanding (not to mention fear and respect) of the dangers of climate change, and the need to act strongly and immediately. BC's provincial liberals would never get my vote under normal circumstances, but I find the NDP's "Axe the Tax" campaign so backwards and short-sighted that they I will steer clear of them when the time comes.

As for the Federal government, the Conservatives presently have a (highly ineffectual, as I recall) cap-and-trade program somewhere in the offing, as a counterpoint to the proposed Federal Liberal carbon tax. The Liberals are getting hammered by their opponents for the proposal, but the funny thing is that a right-wing think tank, the Fraser Institute, recommended taxation as a more efficient way to cut GHG emissions (as opposed to a cap-and-trade scheme). Everything's topsy-turvy.

Posted by: Chris L on 8 Sep 08

I cannot see how a carbon tax can be any help at all. First of all, it increases the cost of everything from food, clothes, etc., not just gas. It will have no effect on the wealthy who buy whatever they want no matter what the price, while at the same time it clamps down on our personal freedoms. I also resent the fact that it will cost me more to live my life the way I have to. I have an injured back so I have to drive a van, not just for the sake of a bigger vehicle for fun, but because of the smoother ride, the higher seats, and the more room that I need. If not, I would be confined to my house as I cannot ride cramped into tiny vehicles. I would be in severe pain. I also have severe asthma and allergies. In most places, other than low humidity desert areas, I cannot even go out to ride a bike or walk. I would have infections from the molds, dust, etc, or else have asthma attacks. I also need air conditioning even when others do not--in order to lower humidity and cool the air so that I can just breathe.

So, all of that means that I will pay way more for fuel, electricity, etc just in order have some kind of a decent life.

I would much rather see big corporations paying for their polluting ways rather than the average person. And...why not force car companies to produce electric cars, and other vehicles using alternative fuels--how about solar powered cars. We could have larger cars if they all had solar panels on the roof and cost next to nothing to operate. What is wrong with going that route?? I am sick of taxes, esp in Canada--we are taxed to death...and we pay way more for gas than in the US. We should pay less, as we have all that gas in Alberta.

I am sitting in the Arizona desert right now, so that I can breathe, and to even consider riding bikes or walking very far is laughable. There is 5 million people here--the airport is over 20 miles away. If I want to go to the museum it 20 miles away--am I going to ride my bike--how dumb is that. This leads me to another issue. Has anyone considered the effect of the carbon tax on travelling and the tourism trade. So we are all supposed to stay home and ride bikes. All the museums, restaurants, National Parks, Campgrounds, etc, etc, might as well close down as we move back in time when we all traveled by horse and buggy and no one went more than 20 miles from home in their entire life. I can hardly believe this nonsense.

Sorry, I am beginning to rant. I want my grandkids to travel the world and see things that I haven't even seen. The best education is to travel and to see other cultures. However, it will soon be too expensive to do that. The only thing they will see are the sights that they can walk to (4 blocks away). I am sure glad that I will be dead and gone before this whole nonsense gets totally out of hand.


Posted by: Les on 14 Sep 08



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