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The Future of BC’s Carbon Tax

On March 17, Carbon Talks hosted its third brown bag dialogue of the year. In the past, greenhouse gas emissions were essentially ‘free’ for the individuals and corporations emitting them, and only the environment paid the full price. During this dialogue, Nancy Olewiler asked “what do people do when they can get something for free? They take as much of it as they can!” The potential solution is BC’s carbon tax.

The carbon tax is a price tag on GHG emissions and an incentive to get off a high carbon diet. Nancy Olewiler led the dialogue participants through the many merits of the policy – the gradually increasing tax rates will give industries time to adjust to the carbon tax. The tax also has a definite certainty to it because new tax rates are embedded into legislation.

But like any newly implemented policy, the carbon tax is not without shortcomings. Both Nancy Olewiler and the dialogue participants raised a number of issues with the policy as well as suggestions for ways to improve the policy.

Public support is critical for any government policy to thrive. In order to gain public support, the government ensured that the carbon tax would be 100% revenue neutral: every dollar of carbon tax collected must return to taxpayers in the form of reductions and credits.

Click to enlarge financial statement for carbon tax.

Problems with this aspect of the carbon tax are already arising – the 2009/10 forecasts indicate that the government will be returning over $2 million more than it will collect. This sort of discrepancy is not sustainable. Like energy, taxpayer dollars cannot be created or destroyed, only transferred among sectors. If the government continues returning more than it collects for the carbon tax, the government will have to cut funding or increase taxes in other areas.

Nancy Olewiler concluded her discussion of the carbon tax by saying that it is too soon to tell statistically if the carbon tax is working. There has been some evident that corporations are paying attention to the tax and changing their business practices. Still, Nancy Olewiler speculated about whether the carbon tax does enough to change behaviour on an individual level. One major concern is that the government will not be able to raise tax rates high enough to stimulate substantial GHG reductions.

How should the government deal with these shortcomings in the future? What will happen to the carbon tax after 2012? Participants at the dialogue made a number of insightful suggestions. One crucial key to future success for the carbon tax is the public’s trust in the policy. To attain this trust, the government needs to communicate the policy’s procedures and successes.

There were some interesting proposals from our dialogue participants – the government could associate the carbon tax with Medical Service Plan reductions in on order to increase the visibility of the tax. Another suggestion for increased visibility was to include a line on pay stubs showing carbon-tax related tax reductions. Everyone at the dialogue seemed to be in agreement: consolidating public support is the best way to help the government’s carbon tax policy have the desired impact now and into the future.

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