Energy Law

British Columbia Launches North America's First Carbon Tax

By Tracy Davis

On July 1, the British Columbia government implemented a consumer-based carbon tax on fossil fuels.  The revenue neutral tax is the first of its kind in North America, and applies to all fossil fuels, including gasoline, diesel, natural gas, coal, propane, and home heating oil.  The theory behind the tax is that increasing the prices of fossil fuels based on their carbon content will make renewable, non-fossil energy sources more attractive and will give manufacturers an incentive to be as energy efficient as possible.  Critics complain the tax will increase already high cost of petroleum products.  The B.C. initiative can be expected to sharpen the debate over whether a carbon tax of a cap-and-trade limitation of carbon emissions will prove more effective in stopping anthropogenic climate change.

The tax rate starts at $10 Canadian per metric ton of carbon dioxide-equivalent emissions, and will increase by $5 Canadian per year until 2012.  The government estimated that the tax would add 2.4 cents to each liter of gasoline this year, which would rise to about 7.2 cents per liter by 2012.  Revenues from the tax will offset other taxes paid by B.C. consumers and businesses, particularly income taxes, rendering the tax revenue neutral.  The Province estimates the tax will raise more than $1.8 billion over the next three years.  B.C. will provide tax credits to lower-income individuals and families, and provide an initial $100 "Climate Action Dividend" to all B.C. households to ease the initial burden.  B.C. consumers may not feel a big impact on their electric bills from the carbon tax, however, as most of the Province's power is hydroelectric.

Full post as published by Energy Legal Blog on July 11, 2008 (boomark / email).