Scaling up ambition: Lessons from British Columbia’s carbon tax
Many consider the British Columbia (B.C.) carbon tax to be a ‘textbook’ example of a broad-based, revenue-neutral carbon tax (World Bank, 2017). The carbon tax was introduced in 2008 at a rate of Canadian Dollars (CAD) 10 per metric ton of carbon dioxide (CO2) equivalent and annually raised by CAD 5, until reaching CAD 30 in 2012. The tax is paid by all individuals and businesses that purchase or use fuel in the province. Initially, the revenues from the carbon tax were used to fund reductions in other taxes on citizens and businesses. In May 2013, the government froze carbon tax rates until 2017. As of April 2018, the tax has been increasing again, taking steps of CAD 5 annually to reach CAD 50 in 2021. A portion of these new incremental revenues will be spent on new green initiatives, in addition to measures consistent with the previous revenue-neutral policy.
British Columbia´s carbon tax can be considered a good practice as it involves a broad range of stakeholders that are actively pushing for ambitious tax rates and the long-standing engagement of the government of British Columbia for ambitious climate policies. Also, the carbon tax has given B.C.’s economy a real push to invest in innovative low-carbon production technologies.
· A BOOMING CLEAN TECHNOLOGY INDUSTRY: The carbon tax has successfully supported the emergence
of a world-wide leading clean-tech industry. Seven companies from B.C. alone appear in
the ‘2019 Global Cleantech 100’ list (an annual guide to the world´s top 100 companies in sustainable
innovation) more than from any other province or state around the world (Tipping and
Kniewasser, 2019). According to a 2016 report by KMPG, the tax has been one of the government
policies and programmes that enhanced the development of the clean-tech sector (KPMG, 2016).
· INCENTIVES FOR THE PUBLIC SECTOR TO REDUCE EMISSIONS: As part of the carbon tax policy, B.C.
communities are supported in their efforts to reduce GHG emissions. Those 182 communities that
have signed B.C. Climate Action Charter commit themselves to operate in a carbon-neutral way
and to build energy-efficient communities. To the end of assisting them in their efforts, they can
receive a grant of up to 100 % of the carbon taxes that they pay (UNFCCC, n.a.). Thus, the tax not
only incentivises businesses to innovate (as seen above), but also the public sector.
The carbon tax is administered by the Government of British Columbia through its Ministry of Finance.