British Columbia has imposed a tax on carbon

Effective yesterday (July 1), British Columbia has imposed a broad, revenue-neutral tax on carbon.Logo Bcgov

B.C.’s Revenue-neutral Carbon Tax

On July 1, 2008, subject to approval by the legislature, British Columbia will begin to phase in a fully revenue-neutral carbon tax with built-in protection for lower income British Columbians.

The purpose of the carbon tax is to encourage individuals and businesses to make more environmentally responsible choices, reducing their use of fossil fuels and related emissions. The tax has the advantage of providing an incentive without favouring one way to reduce emissions over another. Business and individuals can choose to avoid it by reducing usage, increasing efficiency, changing fuels, adopting new technology or any combination of these approaches.

A higher price for higher-carbon choices also makes greener options more commercially viable, thereby encouraging businesses and entrepreneurs to develop innovative solutions that offer consumers and business affordable, lower or no-carbon emission alternatives.

British Columbia’s carbon tax is based on the following principles:

Broad-based: The carbon tax will apply to virtually all fossil fuels, including gasoline, diesel, natural gas, coal, propane, and home heating fuel, making it among the broadest and most comprehensive in the world.

Phased in: The carbon tax will be phased in to give individuals, businesses, and industry time to adapt, innovate, and reduce the impact of the tax. The carbon tax starts at a rate based on $10 per tonne of associated carbon, or carbon-equivalent, emissions and will rise by $5 a year for the next four years — reaching $30 per tonne by 2012. This works out to 2.41 cents per litre for gasoline, rising gradually to 7.24 cents a litre by 2012. For diesel and home heating oil, it works out to 2.76 cents per litre, rising to 8.27 cents over the same five-year period.

Protection for lower-income households: To help offset the cost of the carbon tax, lower-income British Columbians will receive an annual Climate Action Credit of $100 per adult and $30 per child; the credit will be paid quarterly along with the federal Goods and Services Tax Credit.

Revenue-neutral: The carbon tax will be revenue neutral. Legislation will require a plan to be tabled in the legislature each year, showing how the revenue raised will be returned to taxpayers. All revenue generated by the carbon tax will be returned to individuals and businesses through reductions to other taxes. None of the carbon tax revenue will be used for expenditure programs. (more…)

The press reports that yesterday the price of gasoline in BC rose 10 cents (US$/gal), which is about the initial amount of the phased-in tax (9 cents).

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