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Carbon tax works to reduce greenhouse emissions and benefit economy

How British Columbia Enacted the Most Effective Carbon Tax in North America, the Atlantic Cities,  CHRIS MOONEY, 26 MARCH 14, Suppose that you live in Vancouver and you drive a car to work. Naturally, you have to get gas regularly. When you stop at the pump, you may see a notice like the one below, explaining that part of the price you’re paying
is, in effect, due to the cost of carbon. That’s because in 2008, the government of British Columbia decided to impose a tax on greenhouse gas emissionsfrom fossil fuels, enacting what has been called ”the most significant carbon tax in the Western Hemisphere by far.”

• A carbon tax is just what it sounds like: The BC government levies a fee, currently 30 Canadian dollars, for every metric ton of carbon dioxide equivalent emissions resulting from the burning of various fuels, including gasoline, diesel, natural gas, and, of course, coal. That amount is then included in the price you pay at the pump—for gasoline, it’s 6.67 cents per liter (about 25 cents per gallon)—or on your home heating bill, or wherever else the tax applies. (Canadian dollars are currently worth about 89 American cents).
• If the goal was to reduce global warming pollution, then the BC carbon tax totally works. Since its passage, gasoline use in British Columbia has plummeted, declining seven times as much as might be expected from an equivalent rise in the market price of gas, according to arecent study by two researchers at the University of Ottawa. That’s apparently because the tax hasn’t just had an economic effect: It has also helped change the culture of energy use in BC. “I think it really increased the awareness about climate change and the need for carbon reduction, just because it was a daily, weekly thing that you saw,” says Merran Smith, the head of Clean Energy Canada. “It made climate action real to people.”

  It also saved many of them a lot of money. Sure, the tax may cost you if you drive your car a great deal, or if you have high home gas heating costs. But it also gives you the opportunity to save a lot of money if you change your habits, for instance by driving less or buying a more fuel-efficient vehicle. That’s because the tax is designed to be “revenue neutral”—the money it raises goes right back to citizens in the form of tax breaks. Overall, the tax has brought in some $5 billion in revenue so far, and more than $3 billion has then been returned in the form of business tax cuts, along with over $1 billion in personal tax breaks, and nearly $1 billion inlow-income tax credits (to protect those for whom rising fuel costs could mean the greatest economic hardship). According to the BC Ministry of Finance, for individuals who earn up to $122,000, income tax rates in the province are now Canada’s lowest.

  So what’s the downside? Well, there really isn’t one for most British Columbians, unless they drive their gas-guzzling cars a lot. (But then, the whole point of taxing carbon is to use market forces to discourage such behavior.) The far bigger downside is for Canadians in other provinces who lack such a sensible policy—and especially for Americans. In the United States, the idea of doing anything about global warming is currently anathema, even though addressing the problem in the way that British Columbia has done would help the environment and could also put money back in many people’s pockets. Such is the depth of our dysfunction; but by looking closely at British Columbia, at least we can see that it doesn’t have to be that way……….

• The tax has actually become quite popular. “Polls have shown anywhere from 55 to 65 percent support for the tax,” says Stewart Elgie, director of the University of Ottawa’s Institute of the Environment. “And it would be hard to find any tax that the majority of people say they like, but the majority of people say they like this tax.”It certainly doesn’t hurt that the tax, well, worked. That’s clear on at least three fronts: Major reductions in fuel usage in BC, a corresponding decline in greenhouse gas emissions, and the lack of a negative impact on the BC economy……..
• The bottom line, then, is that BC’s experience provides an exclamation point at the end of the long list of reasons to like a carbon tax. Perhaps the leading one, in the end, is that it’s a far simpler policy option than a cap and trade scheme, and is, as Harvard economist and Bush administration Council of Economic Advisers chair N. Gregory Mankiw has put it, “more effective and less invasive” than the sort of regulatory approaches that the government tends to implement.Indeed, economists tend to adore carbon taxes. When the IGM forum asked a group of 51 prominent economists whether a carbon tax would be “a less expensive way to reduce carbon dioxide emissions than would be a collection of policies such as ‘corporate average fuel economy’ requirements for automobiles,” assent was extremely high: 90 percent either agreed or strongly agreed. Yale economist Christopher Udry commented, “This is as clear as economics gets; provides incentives to find minimally costly ways to reduce emissions.”

  “Totally basic economics!” added Stanford’s Robert Hall.

  Since 2012, British Columbia has not raised the carbon tax further. Instead, the government agreed to freeze the rate as it is for five years. And no wonder: BC is now far ahead of most of its neighbors, and most of North America, in taking action to curtail global warming………

• In the meantime, BC can boast of the crown jewel of North American climate policy. “BC now has the lowest fuel use in Canada, the lowest tax rates in Canada, and a pretty healthy economy,” says the University of Ottawa’s Stewart Elgie. “It works.”http://www.theatlanticcities.com/jobs-and-economy/2014/03/how-british-columbia-enacted-most-effective-carbon-tax-north-america/8732/

April 2, 2014 - Posted by Christina Macpherson | Canada, climate change