Let the evidence speak for itself on the effect of carbon taxes

Op-ed - July 4, 2012 - By Matt Horne

Published in The Vancouver Sun (July 4, 2012), Point Carbon (July 20, 2012)

Last week, energy consultant Aldyen Donnelly presented a dizzying array of numbers and claims to criticize a recent study on British Columbia’s carbon tax that was co-authored by the Pembina Institute and the Energy and Materials Research Group at Simon Fraser University.

The problem is, Donnelly’s numbers ignored much of the important evidence on B.C.’s carbon tax and similar policies around the world.

Taking the time to review that evidence shows that B.C.’s climate policies (including the carbon tax) are starting to push down fossil fuel consumption. Let’s take a look at some of the major questions Donnelly raises:

Is B.C.’s carbon tax working to reduce emissions?

The main purpose of the carbon tax is to encourage people and businesses to use cleaner sources of energy, and to use energy as efficiently as possible. So, to get an idea about whether B.C.’s carbon tax is working, we first need to look at the consumption of coal, natural gas, gasoline and diesel in the province. Statistics published by the B.C. government last week show that the carbon tax and other climate change policies are having a positive impact.

The end-use demand for fossil fuels is down in the province, and it has been dropping faster than the Canadian average, implying that B.C.’s efforts to reduce emissions are delivering results.

Is B.C.’s carbon tax having an impact on the economy?

When the carbon tax was introduced in 2008, there were plenty of doomsday forecasts that B.C.’s economy would come crashing down. While B.C. has had its share of economic struggles, the simple reality is that there is no evidence indicating the province’s carbon tax is negatively impacting the economy.

B.C.’s gross domestic product is down slightly from 2008 when the carbon tax was introduced, but the rest of Canada has experienced a bigger decline.

As discussed in our study, there are concerns about potential impacts in some sectors, especially if the carbon tax rate keeps increasing. We should be assessing those concerns and confronting them in a way that allows B.C. to continue moving toward its climate change commitments.

For example, if there are legitimate competitiveness concerns in a specific sector, the province could invest some of the carbon tax revenue to help that sector reduce its emissions and remain competitive in the long-term.

Is B.C.’s carbon tax putting low-income British Columbians at a disadvantage?

An important concern about carbon taxes is their potential to negatively impact low-income households. The last thing we want is for environmental policy to be exacerbating inequity in the province, and on this point, Donnelly raises some valid arguments. B.C. did implement low-income tax credits when it brought in the carbon tax, and although those credits have increased since 2008, the increases have not kept pace with the rise in the carbon tax. This issue came up in our research, and 71 per cent of participants said carbon tax revenue should be used to protect low-income British Columbians from rising energy prices.

What can we learn from carbon taxes in other jurisdictions?

B.C. is not alone in taxing carbon, and the experiences of countries like Sweden and Finland — countries that implemented similar policies more than two decades ago — offer useful lessons for our province. The general message coming from those jurisdictions is that while carbon taxes are not a silver bullet, they’ve helped the environment without harming the economy. A study of seven European countries that implemented environmental taxes in the 1990s found that greenhouse gas emissions were down from two to six per cent, and the overall effect on gross domestic product had been negligible.

None of this is to say that B.C.’s carbon tax is perfect or that there won’t be challenges moving forward. It is a good first step that, based on the evidence, seems to be having the desired effect of reducing fossil fuel consumption and maintaining a strong economy. British Columbians should be proud of what has been accomplished, and we should build on these initial successes by calling for stronger climate policies.

In the face of frightening forecasts of how climate change could affect our communities, rivers and forests, British Columbians should be doing everything we can to avoid the worst-case scenarios. The floods that have been wreaking havoc in many B.C. communities offer a troubling preview of the consequences of inaction, but there are better ways forward.

By strengthening the carbon tax and complementing that approach with other policies that will reduce our reliance on fossil fuels, B.C. can continue to demonstrate national leadership and build momentum toward delivering significant climate results.

Matt Horne is co-author of the study British Columbia's Carbon Tax: Exploring perspectives and seeking common ground.

Matt Horne
Matt Horne

Matt Horne was the Pembina Institute's associate regional director for British Columbia until 2016.


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