Shortly after the provincial budget was released this February, I co-authored an op-ed in the Vancouver Sun outlining the opportunities that a review of B.C.’s carbon could present. Two points were key: the need for a process based on credible evidence, and the need for families, communities and businesses from all parts of the province to have an opportunity, and an expectation, to be part of the solution.
Yesterday, the government announced a change to the tax in what amounts to temporarily eliminating $7.6 million in carbon taxes from greenhouses in B.C. and, in the process, placed the review on the edge of a slippery slope.
Making decisions based on evidence
The change in policy for greenhouses was premised on the argument that the carbon tax is making it hard for the sector to compete internationally. When jurisdictions have taxes (of any kind) that are higher than competing jurisdictions, it can negatively impact competiveness.
In the case of B.C.’s carbon tax, however, it’s important to remember that paying for pollution is only one side of the equation: the carbon tax is used to pay for a variety of other tax cuts intended to keep businesses competitive. In 2011/2012, those cuts include $600 million to corporate income tax for the entire economy and an additional $2 million to school property tax for farms.
The government cites a B.C. Jobs Plan report for the greenhouse growers sector that “…identified the carbon tax as a significant challenge facing the growth of the sector.” The problem is, that report only looks at one side of the story by focusing on the $6.3 million that the sector is expecting to pay in carbon tax in 2012. There is no comparison with the income and property tax cuts the sector received as part of the policy.
Assessing the impacts on economic competitiveness – for any sector – should include all sides of the ledger.
Ensuring everyone is part of the solution
This is not to say that the economics of agriculture in B.C. aren’t challenging. I’ve been closely involved in a community farm for the past 10 years and have a number of friends trying to make a living in farm-related work. There’s no question that it’s tough. If an evidence-based review shows that the carbon tax and accompanying tax cuts are hurting a sector’s ability to compete, it’s entirely reasonable to address the problem.
When trying to solve those challenges though, it’s important to remember the reason B.C. implemented the carbon tax in the first place: to do our fair share to tackle climate change. Giving out carbon tax exemptions undermines that objective by placing the burden on a smaller set of communities and businesses.
Instead, we should be finding solutions that address both fronts. For example, if there is a demonstrated need to improve the competiveness of the greenhouse growers, the province could invest carbon tax revenues in solutions that help them reduce their greenhouse gas emissions. That would help them reduce their carbon tax bills permanently instead of offering the temporary benefit of a one-year tax exemption.
According to the same B.C. Jobs Plan report:
“There are a number of measures that can be taken to improve energy efficiency in greenhouse installations, as well as innovations in heating technology such as co-generation systems, which will also provide an opportunity for diversified revenue streams, and systems that use renewable energy.”
It also acknowledges that there are barriers to adopting these technologies. If the technology solutions are available, why not focus on removing the barriers instead of removing an incentive to adopt the technologies?
With the carbon tax review just getting underway, the most significant thing about this change is the bad precedent it sets. The $7.6 million exemption is 0.6 per cent of the $1.2 billion the province expects to collect in carbon taxes this year, so it isn’t going to make or break our efforts to reduce greenhouse gas emissions. But if the same approach is applied to the rest of the economy, those numbers will get much bigger, and fast.
For the review to help continue building support for the carbon tax, B.C. can’t apply this practice to other sectors. Stay focused on the evidence and remember what the carbon tax is trying to achieve; that’s a much more productive approach.