CANADA’S CARBON TAX – THE PLAN AND A TRYOUT

While most economists in the industrial west agree a “carbon” tax is a superior tool to a "cap-and-trade" system in the fight against global climate change but consider the tax politically out of reach, one Canadian province has begun a “carbon” tax trial and Canada’s Liberal Party leader has dared to come out in support of a national “carbon” tax.

The point of the tax is to make generating greenhouse gas (GhG) emissions more costly and drive consumers, businesses and industry toward better options.

Conservative Canadian Prime Minister Stephan Harper and his party oppose the tax on the grounds that a new tax only grows government and puts a heavier burden on tax payers at a time when fuel prices are already skyrocketing.

Liberal Party leader Stephane Dion and his allies believe a properly designed tax accompanied by personal and corporate tax cuts will make the tax "revenue neutral" while providing funds to develop New Energy and energy efficiency programs that will be good for the economy.

Dion: "We need to make polluters pay and put every single penny back into the hands of Canadians…Our plan will be good for the environment and good for the economy, good for the planet and good for the wallet…"

British Colombia leaders, where a tax on all fossil fuels went into effect on July 1, carefully designed their program to be revenue neutral. To that end, other taxes have been reduced and a $100 rebate was sent out to each provincial resident in the last week of June.

Despite efforts to ease the burdens in BC, opponents say “axe the tax” because rising gas prices are already forcing reductions in travel and gas consumption.

Scott Nelson, Mayor, Williams Lake, British Columbia: "The last thing [the ranching and lumber town of Williams Lake needs] now is a tax on top of these soaring prices to add insult to injury…"

BC leaders insist not dealing with climate change will be more expensive than the tax.

Matthew Bramley, environmental research group Pembina Institute: "I think reversing it would be a huge setback for effective government action on this issue, certainly in Canada and perhaps in all of North America…"

The BC bpublic’s response to the tax could well determine the fate of the national plan Dion is putting forward. It could also have reverberations elsewhere in North America.

click to enlarge

Canada Opposition Liberals Unveil Carbon Tax Plan
Nirmala Menon, June 19, 2008 (Dow Jones Newswires via Nasdaq)
and
North America’s first carbon tax rolls out under fire
Allan Dowd (w/ Rob Wilson), June 27, 2008 (Reuters via Yahoo News)

WHO
Conservative Party Prime Minister Stephen Harper; Liberal Party Leader Stephane Dion

WHAT
The Canadian province of British Colombia (BC) has begun administering a tax on all fossil fuels as a cost on emissions created when using them. Opposition liberal party leader Dion is taking the politically daring step of calling for a similar national tax.

The single most emphasized factor (for political reasons): Keeping the tax revenue neutral. (click to enlarge)

WHEN
- Dion’s official proposal for a Canadian national emissions tax was presented to Parliament June 19.
- The BC tax, the first direct charge on emissions in Canada (and North America), went into effect on Canada Day, July 1.
- BC has pledged to cut GhGs 33 percent by 2020.

WHERE
- Quebec has a limited tax on energy firms emissions. The BC tax is the first on consumers’ use of GhG-generating fossil fuels.
- Current BC gas price (Vancouver): C$1.40/liter. (~$5.30/U.S. gallon)
- The burden of higher gas prices is expected to be heavier in the large province of BC.

British Columbia is giving EVERYBODY a $100 rebate. (click to enlarge)

WHY
- Dion’s tax: Would start at C$10/ton of emissions and increase yearly to C$40/ton in its fourth year.
- Dion’s tax: Would (according to Liberal Party documentation) generate revenues of C$15.34 billion in its fourth year, while costs are estimated at C$15.43 billion.
- Dion’s tax: Average household increased heating and electricity costs in the fourth year: C$225-C$250.
- Dion’s tax: No charge on gasoline at the pump.
- Dion’s tax: No charge in the first year on diesel and aviation fuel.
- Dion’s tax: The lowest tax rate is cut 1.5%; The 2 rates are each cut 1%. The general corporate tax rate and the small income tax rate are cut 1% in the fourth year.
- Dion’s tax: Other incentives include a new C$350/year child tax credit for each child and benefits for lower income Canadians and seniors.
- The BC tax: Nearly all fossil fuels, including gasoline and home heating fuel.
- The BC tax: Starts at C$10/tonne CO2e (2008) and increases C$5/tonne yearly through 2012.
- The BC tax: Drivers pay 2.41 centsC/liter of gas (9.13 cents/U.S. gallon)

QUOTES
- Dion: "[The tax is] completely compatible [with a cap-and-trade system]...We believe that both are necessary and complementary…But...we can move more quickly on immediately pricing carbon through a green shift, while building a real cap-and-trade system with absolute targets over time that will fit with the emerging plans of the next U.S. administration and what is already underway in Europe."