B.C. introduces carbon tax

B.C. introduces carbon taxProvince is first jurisdiction in North America to have consumer-based carbon taxBy Jonathan Fowlie and Fiona Anderson,
Vancouver SunPublished: Tuesday, February 19, 2008

VICTORIA -- Driving and other fuel-dependent activities are about to get more expensive as British Columbia becomes the first jurisdiction in North America to introduce a consumer-based carbon tax.

The carbon tax will apply to virtually all fossil fuels, including gasoline, diesel, natural gas, coal, propane, and home heating fuel. B.C.'s carbon tax, the provincial government claims, will be the most comprehensive in the world. 

However,  Finance Minister Carole Taylor vowed Tuesday that all money collected through the new tax will be returned through a package of tax cuts and credits.

"We have to find a way that we can work towards improving our environment, but at the same time do it in a way that keeps our economy strong," said Taylor, as she presented a budget that, aside from the carbon tax, commits $1 billion over four years to fight climate change.

The 37.7 billion provincial budget also promises an additional $2.9 billion over three years for health care spending. That brings the total health budget to $13.8 billion for the coming year.

Taylor said the new carbon tax will begin July 1, starting at a rate that will have drivers paying about an extra 2.4 cents per litre of gasoline at the pumps.

If you drive a Prius hybrid, the government estimates the new tax will cost you about $20 extra per year. If you have a Dodge Ram pickup truck, that number will be closer to $68 it says.

The tax will then increase each year after that until 2012, reaching a final price of about 7.2 cents per litre at the pumps.

After that, Taylor said, it will rest with the government of the day to decide if the tax rate should change any further.

"We've promised you green and today we've delivered green," said Taylor, dressed in green Fluevogs and a green suit for the occasion.

"This is an important turning point for British Columbia and we think for Canada," she added, likening the climate-change budget measures as a "social movement."

To help people adjust to the cost of the tax -- which promises to achieve about 7.5 per cent of the government's legislated reductions by 2020 -- all British Columbians will receive a one-time $100 cheque this June.

"We want to bring in the benefits first," said Taylor.

Corporate and personal income tax rates will drop to help make the tax revenue neutral, and lower-income British Columbians will receive an annual climate action credit of $100 per adult and $30 per child.

Overall, the government estimates the carbon tax will bring in revenues of about $1.85 billion over the first three years -- all of which it says will be returned to businesses and individuals.

Estimates suggest businesses will pay two thirds of the carbon tax, and will receive only one third of the refunds. By contrast, individuals are expected to pay one third, while receiving two thirds of the credits.

The move was seen as a huge win by environmentalists, who depicted B.C. as a leader in taking action on climate change.

"I think this is a landmark decision in North America as far as government addressing global warming," said Ian Bruce of the Suzuki Foundation.

"The B.C. government has decided to use one of the most powerful incentives at its disposal to reduce pollution," he added, saying he expects the move to help spur innovation.

Lisa Matthaus of Sierra Club B.C. agreed.

"This is the budget that is going to support the significant throne speech commitments from last year, in particular the carbon tax."

Not everyone was equally supportive.

"I think they were pretty quick to pull out the stick when it comes to accomplishing environmental objectives," said Laura Jones, vice-president at the Canadian Federation of Independent Business.

"We know from our surveys that over 80 per cent of business owners are already taking action to get cleaner," she added, saying that is happening without a tax in place.

"I don't think this is the best way to accomplish the goal of getting more environmentally friendly," she said, explaining she would rather have seen a greater focus on education and incentives.

Niels Veldhuis of the Fraser Institute also took issue with the plan.

"This was a lost opportunity for British Columbia in terms of improving the investment climate," he said.

"We had a real and historic opportunity to improve our investment climate, to ensure our prosperity going forward by aggressively reducing business taxes and personal taxes."

For example top earners in B.C. pay taxes almost 50 per cent higher than their counterparts in Alberta, he said.

Instead of reducing taxes they chose to "change the mix," he said.

Though the 2008 budget is clearly a green one, health care also figured heavily into the spending, accounting for more than one third of overall spending.

The government says it will also reduce taxes above and beyond the carbon tax offset by $481 million over three years.

It will also spend $787 million over four years to strengthen social services.

Following the prudence that has become a trademark of Taylor's budgets, the finance minister is putting aside about $1 billion to deal with any surprises, such as larger than expected financial troubles in the United States.

jfowlie@png.canwest.com

fionaanderson@png.canwest.com