Published online 5 May 2009 | Nature | doi:10.1038/news.2009.445
Updated online: 28 May 2009

News

North America's first carbon tax faces judgement

British Columbia's provincial election showcases climate change politics.

Canada Quebec snowmobiling in the Mont Valin areaBritish Columbia's carbon tax may not survive the province's upcoming elections.Alamy

Canadian provincial elections don't normally merit international attention. But economists and environmentalists are looking to the 12 May election in British Columbia, Canada's westernmost province, as a test of several climate change policies — including North America's first carbon tax.

The incumbent BC Liberal party government imposed a province-wide carbon tax in July 2008. Since then, it has been a major campaign issue.

"We are keenly interested in watching this unfold," says economist Charles Komanoff, co-founder of the non-profit Carbon Tax Centre in New York. "If [the British Columbia tax] persists, it will give a big boost to the cause in the United States."

British Columbia's carbon tax was unpopular with many voters from the start, in part because it boosted fuel costs just when oil prices were at a record high. The opposing British Columbia New Democratic Party (NDP) has vowed to "axe the tax", arguing that it is ineffective and unfair on remote populations. Ironically, the NDP has traditionally been 'greener' than the Liberals; it has been accused by some, including Graham Saul of Climate Action Network Canada in Ottawa, Ontario, of taking an anti-carbon-tax stance solely to court votes in a close-running election.

“We are keenly interested in watching this unfold.”

Charles Komanof
Carbon Tax Centre

It can be a sensitive political issue. In Canada's federal election of 2008, the Liberal party campaigned for the "green shift", a plan to put more of the tax burden onto polluters. They lost a significant number of seats, and the idea of a national carbon tax was scrapped — at least for the time being.

Not easy being green

The showdown highlights the political difficulties of implementing climate change policies even in a green-leaning area: British Columbia was the birthplace of Greenpeace and has long been a centre for environmental activism.

Aside from the carbon tax, battle is also being waged over the issue of independent power production. The incumbent BC Liberals have promoted licences allowing private companies to initiate small hydroelectric projects (of the kind that don't require a dam). Some favour this plan as the most efficient way to boost renewable power production. Others object, saying companies cannot be trusted to care for the environment when profits are at stake. The NDP promises to scrap this scheme too.

“The debate had been all abstract until now.”

Tzeporah Berman
PowerUp Canada

What BC is going through are some of the world's first growing pains in adapting to the realities of climate policy, says Tzeporah Berman of the climate-change advocacy group PowerUp Canada in Vancouver, British Columbia. "The debate had been all abstract until now," says Berman. "It had been entirely possible to support a phase-out of fossil fuels and build-out in clean energy without having to face what those things mean in practice."

Paying at the pump

British Columbia's carbon tax is simple: all fuels are taxed based on their emissions, at C$10 per tonne of carbon dioxide equivalents. That's 2.34¢ per litre of petrol at the pump, compared to petrol prices that ranged from 77¢ to C$1.48 per litre in British Columbia in 2008. The tax is planned to ramp up to C$30/tonne by 2012. Concurrent reductions in income tax mean that the tax is 'revenue neutral': the province raises no more tax revenue overall than it would without the tax.

Only a few other places in the world have a carbon tax. Sweden and Norway have perhaps the most entrenched systems, but these are more complex and are "riven with exceptions", says Komanoff. Boulder, Colorado, also hosts a city-wide tax, but only on electricity. "British Columbia is really the world leader," says Komanoff.

It is hard to say yet whether the British Columbia tax is succeeding in decreasing emissions, particularly because a concurrent drop in fuel prices has swamped it. Transport fuel use has increased in British Columbia, but home alterations for energy efficiency have also increased. The University of British Columbia has cited the carbon tax as one reason for upcoming changes to its natural gas power system. One economic model suggests a tax of C$200/tonne would be needed by 2020 to prompt emissions cuts large enough to avoid dangerous climate change.

Price on emissions

The BC Liberals support the development of a cap-and-trade scheme in addition to the carbon tax; the NDP favours cap-and-trade alone, citing US President Barack Obama's interest in such a scheme. Taxation has the advantage of being fast to implement, however. The British Columbia carbon tax came into force within 5 months of being announced in February 2008; the Western Climate Initiative cap-and-trade programme, a US–Canadian scheme including California, British Columbia, and several other provinces and states, won't come into force before 2012.

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Mark Jaccard, an environmental economist at Simon Fraser University, near Vancouver, whose work informed the current carbon tax policy, says he has no particular preference for one scheme or the other. "I don't care. You just have to get a price on emissions," he says.

Current polls put the BC Liberals slightly ahead of the NDP. If they win, the carbon tax and independent power-production schemes will survive.

The lesson learned from British Columbia is that revenue neutrality needs to be made more clear, says Komanoff: voters have tended to notice the additional tax but not the compensating tax cuts. Cash rebates could be a better alternative, he says.

Perhaps the best thing to do is simply ensure that the world's next carbon tax doesn't come into effect at the same time as an oil price spike and a recession: "There's just a lot of bad luck there," Komanoff says. 

Updated:

The BC Liberal party was re-elected; the carbon tax continues, as does the independent power production scheme.

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