November 22, 2016


Canada Moves Ahead on Carbon Taxes, Leaving the U.S. Behind (Peter Fairley,  November 21, 2016, mit tECHNOLOGY rEVIEW)

The British Columbia tax started at C$10 (U.S.$7.40) per metric ton of carbon dioxide on fossil fuels consumed in the province, and it ratcheted up to C$30 per metric ton by 2012. The tax is revenue-neutral, with proceeds used to cut corporate and personal income taxes.

Most academic studies find that British Columbia's tax is reducing carbon emissions by 5 to 15 percent without hurting economic growth, and that a special tax break to offset its impact on low-income families has succeeded. "The tax appears to be highly progressive," says Nicholas Rivers, an expert in energy and economic modeling at the University of Ottawa.

Likewise, the Washington tax was to start next year at $15 per metric ton (adding, for example, about 15 cents to every gallon of gasoline), then rise to $25 in 2018 and grow annually thereafter by a further 3.5 percent plus inflation until it reached $100 per ton. Revenues were to cut existing taxes and provide tax benefits for low-income families.

The initiative garnered strong grassroots support as well as endorsements from Democratic and Republican legislators, including former Republican Senator Slade Gorton and Joe Fitzgibbon, who chairs the state legislature's environment committee. But the Washington initiative was opposed by both fossil fuel interests as well as advocacy groups that favored spending carbon revenues on development projects to ensure a "just" transition to a low-carbon economy.

In Canada, meanwhile, politicians from all major parties are pushing carbon taxes nationwide. Last month Prime Minister Justin Trudeau announced that his Liberal Party government will institute a national carbon tax plan in 2018. And last week a contender for leader of the official opposition in Parliament, Canada's Conservative Party, unveiled a more ambitious carbon tax.

Provincial leaders have done much of the heavy lifting already. Canada's two largest western provinces will have carbon taxes operating as of January 1, when Alberta follows British Columbia's lead with a C$20 per metric ton carbon levy that's set to rise to C$30 in 2018. And as of March, Canada's eastern heavyweights Ontario and Quebec will auction carbon credits under a cap-and-trade market that California kicked off in 2012.

Trudeau's national carbon tax plan encourages the remaining provinces to operate their own programs, and mandates that all attain a minimum carbon price that ratchets up from C$10 in 2018 to C$50 in 2022.

Conservative parliamentarian Michael Chong wants to push carbon taxes to C$130 per metric ton in 2030, providing the policy certainty that he says businesses need to plan investments. And whereas some provinces such as Quebec and Ontario are using carbon revenues to fund programs, Chong's plan mirrors the revenue neutrality of British Columbia's carbon tax. "Every last cent will be used to introduce one of the largest income tax cuts in Canadian history," vows Chong.

Posted by at November 22, 2016 6:02 PM