B.C. Business Matters:
Denise Mullen >>
Putting the BC Carbon Price in Perspective
If a picture is worth 1000 words, then the figure below depicts the stark reality about British Columbia’s carbon price as of 2016. Put simply, it is the highest in North America by a wide margin, given its attributes and broad application across most of the province’s economy. The BC carbon tax is also among the steepest in the world.
Compared to other North American jurisdictions, the carbon price is higher in BC by 2x to 100x, taking into account the important fact that most regions currently maintain an effective carbon price of precisely $0. The gap will remain wide for at least the next few years, if not longer. Even when Ontario and Manitoba join Quebec and California in a “cap and trade” market later in the decade, the data suggests that the price of carbon will be roughly where it is today unless the participating governments take aggressive action to force the price higher.
Does it really make sense for BC to pledge to increase its already onerous carbon tax by $10 per year starting in 2018 into the indefinite future, as proposed by some environmental groups? It is hard to see why it would. Such a step would exacerbate concerns over BC’s competitiveness that are most keenly felt by industries that supply well over half of the province’s exports. Widening the carbon price gap to BC’s disadvantage would also hurt some local service and technology businesses (e.g., engineering, finance, professional services, and environmental consulting) that depend on selling goods and services to the natural resource and manufacturing industries in BC.
Here are a few other pertinent facts about carbon pricing BC style:
- BC has had a carbon tax since 2008. Households and businesses here have been paying a carbon price for eight years.
- BC’s carbon tax amounts to 6.67 cents for every litre of gasoline purchased. This contributes to making BC’s gasoline prices the highest in North America.
- Quebec industries have faced a carbon price for the past two years, when that province linked with the California cap and trade market, which itself was implemented in November 2012. But the applicable carbon price in Quebec is far below that in BC.
- Alberta residents do not pay a carbon tax, at the moment. Certain Alberta industries, those specified in regulation, have been paying a carbon tax since 2007. However, an important difference between Alberta and BC is that covered industry sectors in the former only pay the tax on their incremental emissions above a baseline level, whereas in BC the carbon tax is charged on all fossil fuel combustion.
- Quebec today, and eventually Ontario and Manitoba, have all acted to protect their energy intensive and trade exposed industries from the effects of carbon pricing, by giving them free or partly free allowances, thus effectively exempting these industries from having to shoulder the economic burden associated with a carbon price. BC did not follow a similar path.
- Ontario and Manitoba plan to join the California-Quebec market, but this will not happen before 2020 as it takes time to build the framework and ensure that the applicable market rules are compatible. Once carbon pricing commences in Ontario and Manitoba, the price is likely to be in the range of $15/tonne, equal to half of the current BC carbon tax.