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

  • Internet policy video
  • As the Internet transforms the way people, businesses, and economies work, what policies do governments need to implement so that everyone benefits from the digital economy?
  • "About 53% of foreign bribery cases involved corporate management or CEOs." Read more in the OECD Foreign Bribery Report
  • France 24 – Eurozone weakness threatens global economy: The Eurozone could get stuck in a “stagnation trap" without decisive action and poses a risk to the entire global economy.
  • [Video] If Africa aided Norway: Radi-aid challenges clichés.
  • [VIDEO] Migration is constantly evolving. Around one in ten people in the developed world today is an immigrant. And over the past decade, migrants have accounted for 70% of the increase in the working-age population in the OECD area, according to the OECD’s latest International Migration Outlook.
  • 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.
  • 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.

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