Taxing carbon in British Columbia

©AdStock Rf. Under licence from Shutterstock

In July 2008, the Canadian province of British Columbia (BC) launched North America’s first revenue-neutral carbon tax reform. “The Political Economy of British Columbia’s Carbon Tax”, an OECD Environment Working Paper by Kathryn Harrison, looks at this tax from its origins, following it through and beyond a period of political backlash, and finally considers its prospects for the longer term. 

The emergence of a carbon tax in British Columbia reflected a confluence of political conditions ripe for carbon taxation: availability of untapped hydro potential, a surge in public concern for climate change, and broad support from a government that was trusted by the business community.

The tax, which applied to all combustion sources of all fossil fuels, was introduced at a rate of CAD$10 per tonne of CO2, with a schedule for annual increases of CAD$5 per tonne of CO2 until the tax reached CAD$30 per tonne of CO2 in 2012. Tax revenues were fully recycled via a combination of corporate and income tax cuts, phased in over time.

The tax did provoke public opposition, including from business, as other North American jurisdictions failed to follow through on their commitments to carbon pricing. But though its launch was rocky, the carbon tax has enjoyed smoother sailing as time has passed. Five years later, the BC experience suggests that the political economy of an established carbon tax is very different from that of a new tax. Public support has rebounded, with the number of voters supporting the tax now almost double the number opposed to it.

Today, academic studies are beginning to emerge suggesting that the tax has prompted reductions in greenhouse gas emissions without doing significant harm to the economy. Moreover, the carbon tax revenues have been an important source of income for the BC government during a period of limited economic growth. That said, with BC being rather alone in its commitment to carbon pricing, the question of how the government will respond to the tax’s influence on the province’s competitiveness remains.

Harrison, K. (2013), “the political economy of British Columbia’s carbon tax”, OECD Environment Working Papers, No 63, OECD Publishing.

See www.oecd.org/environment/climate-carbon.htm

©OECD Observer No 297, Q4 2013




Economic data

E-Newsletter

Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Editor's choice

  • More fiscal stimulus could help Japan: speaking with CNBC, Randall Jones, Head of Japan/Korea Desk at OECD, warns that Japan needs a detailed and credible fiscal consolidation plan.
  • Modest global economic forecasts, continuing high unemployment and serious downside risks should spur governments with a greater sense of urgency to fully employ monetary, fiscal and structural policy levers to support growth, notably in Europe, according to the OECD’s latest Economic Outlook.
  • OECD Employment Outlook 2014: The OECD Employment Outlook 2014 includes chapters on recent labour market developments with a special section on earnings, job quality, youth employment, and forms of employment and employment protection.
  • OECD General-Secretary Angel Gurría on Global Economy. Angel Gurría speaks in Brisbane, where the G-20 summit took place this weekend,on Bloomberg Television's "On the Move."
  • Education at a Glance 2014: OECD Indicators:This book provides annual data on the structure, finances and performance of education systems in the OECD’s 34 member countries, as well as a number of partner countries.
  • Try our latest OECD Observer crossword!
  • Better Life Index
    How do you measure a Better Life? The OECD has launched a new interactive infographic where visitors can explore the priorities of people worldwide. Be a part of it. Create and share your Better Life Index.
  • Tim Harcourt Video
  • G20 and Australia: Economist Tim Harcourt speaks to the BBC about how Australia has gone from "Down Under to Down Wonder".
  • OECD Week 2014 : Resilient economies for inclusive societies. Forum 2014 was organised around three cross-cutting themes: Inclusive Growth, Jobs, and Trust. Watch the video. And check out our 2014 yearbook by clicking here.
  • better-life
  • What does a better life mean for you? Watch this video produced by students from La Sorbonne and see what people around the world have to say.
  • In the transition to cleaner and greener economies, the OECD is helping government and business with the tools to get climate finance right for greener growth plus job creation, while treating our environment as a precious resource.

Most Popular Articles

Subscribe Now

<b>Subscribe now!</b>

To receive your exclusive print editions delivered to you directly


Online edition
Previous editions

Poll

Is deflation a major risk in OECD economies?

Yes
No
Don't know

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2014