Carbon Tax – The British Columbia Experiment

Accustomed as we are to the politics of paralysis in Washington, D.C., it is refreshing and inspiring to know that some English-speaking politicians have done the obvious, right thing on our time’s most critical issue. Some Canadians saw global warming as a life and death problem and legislated a carbon tax, weak though it is. British Columbia, which is Canada’s west coast province, implemented a revenue-neutral carbon tax on July 1, 2008. The law provided for annual carbon tax increases through July 1, 2012, when the tax rate topped out at about $0.20 per gallon of gasoline. The tax is revenue-neutral, meaning that every dollar generated by the tax is returned to B.C. Canadians through reductions in other taxes. B.C. politicians acted in 2008 soon after the Intergovernmental Panel on Climate Change , which the B.C. Ministry of Finance tagged as “representing the most respected climate experts worldwide,” issued a November, 2007, report the Ministry labeled as “the most decisive evidence yet showing hat Earth’s climate is changing because of human activities. The effects will continue to worsen if no action is taken.”

The Ministry of Finance defines a “carbon tax” generally, and B.C.’s own, as follows:

“A carbon tax is usually defined as a tax based on greenhouse gas emissions (GHG) generated from burning fuels. It puts a price on each tonne of GHG emitted, sending a price signal that will, over time, elicit a powerful market response across the entire economy, resulting in reduced emissions. It has the advantage of providing an incentive without favouring any one way of reducing emissions over another. By reducing fuel consumption, increasing fuel efficiency, using cleaner fuels and adopting new technology, businesses and individuals can reduce the amount they pay in carbon tax, or even offset it altogether.”

The bad news is that the British Columbia carbon tax stands alone in North America, and the B.C. government is now undertaking a “comprehensive review” of the tax’s impact on the competitiveness of B.C. businesses. No other Canadian province, and of course no deliberately blind, deaf and dumb federal or state government in the United States, has a carbon tax. As a result, B.C. food producers and manufacturers operate at a competitive disadvantage. The carbon tax raises costs of fuel inputs required to produce food, tourist travel and manufactured goods, and buyers can go elsewhere.

I discussed the need for a strong American carbon tax in earlier posts – the necessity of such a tax as well as such a tax compared to a cap and trade regime.  For the health of the country, I would prefer a high carbon tax whose revenues would go to reducing our ridiculous and unsustainable federal deficits, but that appears to have even less chance of becoming American law than a revenue-neutral tax. The National Oceanic and Atmospheric Administration has just reported that the period from January through June of 2012 was “the warmest first half of any year on record for the contiguous United States.” The average temperature for the period was 52.9 degrees Fahrenheit, an alarming 4.5 degrees above average. I unkindly hope that Washington, D.C. continues to get 100-degree-plus days, with air-conditioning failures in appropriate government offices, while Congress and the Obama Administration remain in town.