BCBC In The News
Investopedia: Could a Carbon Tax Work?
[Excerpt] British Columbia's carbon tax, introduced in 2008, is broadly considered a success. A May 2015 Duke working paper found that emissions in the province fell by 5% to 15% with "negligible effects on aggregate economic performance, though certain emissions-intensive sectors have faced challenges." The authors found the tax to be revenue-neutral; in fact the government returned slightly more money to households than it took in carbon tax revenues.
I appears that carbon pricing can work, in other words. Even business leaders in the province are more-or-less okay with the new status quo. "We were not very happy when it was first announced," Business Council of British Columbia's head of policy Jock Finlayson told the New York Times in March. But that opposition has since given way to "a sizable constituency saying this is O.K."
The Georgia Straight: A close look at the B.C. NDP, Liberal, and Green plans for a higher minimum wage
[Excerpt] Jock Finlayson is executive vice president of the Business Council of British Columbia. He told the Straight that most employers are supportive of regular increases like the Liberal government’s peg to the consumer price index. On $15 by 2021, Finlayson said: “I think that would start to push the envelope a bit.”
He didn’t dismiss further increases outright, but he argued in favour of more nuanced policies: for example, looking at the relationship between the minimum wage and the average industrial wage, which was about $25 in 2015.
“I think there is room for healthy debate on what the statutory minimum should be,” Finlayson said. “Should it be 50 percent of the average [industrial wage] or should it be pushed up higher, as some people on the left will argue? I think that’s a reasonable debate to have.”
Business in Vancouver: Carbon price comparison shows B.C. is not a laggard
A character in an Oscar Wilde play defined a cynic as someone who knows the price of everything and the value of nothing.
When it comes to carbon pricing, it’s easy to fixate on the price rather than its value as a carbon reduction tool, and recently the Pembina Institute has taken a cynical view of B.C.’s commitment to battling climate change.
B.C. has frozen its carbon tax at $30 per tonne since 2013, and despite recommendations from its own Climate Action Team (CLT) to start raising it by $10 per tonne after 2018, there have been signals that the tax might continue to be frozen at $30 until a national carbon scheme is announced.
In June, the Pembina Institute labelled B.C. “a climate laggard when compared to Canada’s other most populous provinces,” based on the carbon tax freeze and the fact that B.C. will not meet its 2020 greenhouse gases (GHG) reduction targets.
But is B.C. truly a climate change laggard?
Even if B.C. does nothing more with its climate action plan, the efficacy of its current policies shows it’s no laggard.
The real value of any policy is its stringency – its ability to reduce GHG emissions. And on that score, the Ecofiscal Commission cites studies that show the emissions to be reduced in B.C. by 2020 at between 5% and 15% compared with 7% in Alberta, 11% in Ontario and 15% in Quebec.
The Business Council of BC has urged the B.C. government to continue the carbon tax freeze until other jurisdictions have caught up.
Cement plants and greenhouses are among business that could suffer from carbon prices that are too high compared with competing provinces, states and countries that don’t have carbon pricing.
As Ecofiscal Commission chairman Chris Ragan points, if a high carbon tax drives an industry to move across the border to a U.S. state where there is no carbon tax, it’s a lose-lose situation because it means a Canadian province takes an economic hit and no net GHG reduction has been achieved.
Business in Vancouver: No carbon tax hike in B.C.’s new climate plan
The B.C. government will not raise the carbon tax above $30 per tonne for the foreseeable future, and its new climate action plan fails to adopt some key recommendations made by the government’s own Climate Leadership Team (CLT).
Of the 32 recommendations made by the CLT, the key one was raising B.C.’s $30 per tonne carbon tax by $10 per year, after 2018. It has been frozen at $30 per tonne since 2013.
But Premier Christy Clark defended inaction on the carbon tax hike, saying other jurisdictions have not yet caught up to B.C.
“We will consider raising the carbon tax as other provinces catch up,” Clark said.
There is a concern with “leakage” when one jurisdiction has carbon pricing that is higher than competing jurisdictions. Industries may simply move to jurisdictions with lower carbon prices – or no price at all – which means a loss to the economy, but no net reduction to actual emissions, which will simply be produced in some other jurisdiction.
“There's a recognition that B.C. has had the highest carbon tax in North America, and still will have in the next five years, even based on the plans other jurisdictions have made,” said Greg D’Avignon, president of the Business Council of BC. “And they’re mindful of the fact that B.C. has to remain competitive going forward, particularly for trade exposed industries and those that are energy intensive.”
Vancouver Sun: B.C. Liberals rein in greenhouse-gas emissions goals, put off carbon tax change
The B.C. Liberal government has put off the heavy lifting on reducing greenhouse gas emissions to a later date, under a new plan released today.
The much-anticipated update to a 2008 plan created under then-premier Gordon Campbell recommits the province to achieving an 80 per cent reduction over 2007 levels by 2050.
However, today’s 52-page plan only lays out actions estimated to achieve less than half of the needed reductions by 2050, and much less if the government’s much-hoped-for liquefied natural gas export industry materializes and significantly increases emissions.
While it’s already known that B.C. will not meet its 2020 target of reducing emissions by one-third, the Christy Clark-led Liberals are not setting a new interim target and will have to remove from law the 2020 legislated target.
B.C. Business Council president Greg D’Avignon said the B.C. government’s caution in raising the carbon tax is prudent given that it’s the highest in North America, sixth highest in the world and no province has a carbon tax now. “We have to continue to make sure that B.C. businesses can compete,” he said.
Daily Hive: New BC climate plan promises to hit targets but gets mixed reaction
[Excerpt] In a release reacting to the plan, the Business Council of BC supported the province’s efforts but expressed concern about being able to grow jobs in this climate.
“As a small trading economy, BC is competing with jurisdictions that have not taken similar climate management steps, putting a number of our energy-intensive, trade-exposed industries at a disadvantage in the global market,” President & CEO Greg D’Avignon and EVP & Chief Policy Officer Jock Finlayson said in the joint statement.
The council supports putting a price on carbon emissions, said the statement, but it was time to match others’ carbon tax rates instead of waiting for others to catch up.
“There are some businesses operating in British Columbia that pay upwards of $30 to $50 million in carbon tax each year.”
“In the wider Canadian context the Business Council supports putting a price on carbon emissions to incent behavioural change and encourage increased investments in low-carbon technologies.
“For British Columbia, this means coordinating carbon pricing with the national government to create a level playing field for business and industry across the country.”
CTV News: B.C. keeps freeze on carbon tax in new climate plan, won't adjust target
The British Columbia government is maintaining a freeze on its carbon tax and refusing to budge on a timeline to reduce greenhouse gas emissions in a new climate plan that environmental groups describe as a missed opportunity.
Premier Christy Clark said Friday that the government needs to keep the province economically competitive to protect jobs in the battle against climate change as she highlighted 21 measures the province is taking to cut emissions.
"A climate plan is not just about carbon pricing," she told a news conference. "As the World Bank noted, carbon pricing is just one instrument in a portfolio of approaches to fight climate change. And we cannot get where we need to be in fighting climate change in British Columbia with a carbon tax alone."
The Business Council of British Columbia said it remains concerned about the competitiveness of its members, particularly exporters.
"As a small trading economy, B.C. is competing with jurisdictions that have not taken similar climate management steps, putting a number of our energy-intensive, trade-exposed industries at a disadvantage in the global market," it said in a statement.
It said some businesses are paying up to $50 million a year in carbon tax.
"These businesses must compete with companies based outside of the province that sell goods into B.C. and other global markets while paying a much lower price on carbon, or no carbon levy at all. This makes these businesses less competitive."
Jock Finlayson on Roundhouse Radio
Jock Finlayson joins Business in Vancouver on Roundhouse Radio to discuss the impact of the new Metro Vancouver Foreign Buyers Tax and its impact on attracting talent to the region. (Listen at 16:20)
EnergeticCity.ca: Minister convinced LNG boom still going to happen
While it still believes the economy of this province will be at or near the top of provincial growth charts this year and next, the BC Business Council is nevertheless cutting its B-C growth forecast.
It’s now predicting growth of two point seven percent this year, and two point six percent next year, and economist Ken Peacock says it’s the result of a more muted global economy, and the lack of progress toward the long forecast development of a BC Liquefied Natural Gas Industry.
However, that doesn’t play well with a government which promised a robust LNG industry prior to the last provincial election, and is now getting ready to face the electorate again next spring.
After promising 100 thousand jobs and a debt free BC in the 2013 election campaign, Natural Gas Minister Rich Coleman in speaking this week, with Jon McComb on CKNW, responded to critics, who suggest the Liberals have hoodwinked voters.
He argues that spending is already having a ripple impact in northern communities, and while the slump in world oil and gas prices has slowed things down the government expects a demand rebound.
He adds the feds. need to kick start the process with environmental approval for Kitimat’s stalled Pacific Northwest LNG project.
Mr. Coleman also believes while prices are now in the gutter — they’ll recover by the time the B-C plants are online.
Abbotsford News: Metro Vancouver home tax could send foreign buyers to Abbotsford
The province's new 15 per cent property-transfer tax on the purchase of Metro Vancouver homes by foreigners could send some of those buyers looking to Abbotsford but is unlikely to significantly increase demand for local homes, according to one economist.
The tax applies to non-Canadian citizens without permanent residency status.
Jock Finlayson, executive vice-president of the Business Council of B.C., said the new tax will likely dampen demand for residential property in Vancouver, Richmond, the North Shore and other municipalities where prices have skyrocketed in recent years.
But while some buyers will turn to the Fraser Valley, the Victoria area and other regions outside the Lower Mainland, such movement will be minimal, he predicts.
"We're talking about more of a dribble than a flood, simply because foreign investors who have been coming in to the real estate market tend to have very strong locational preferences," said Finlayson.
He said foreign buyers from China are more attracted to the west side of Vancouver and Richmond because of existing strong Asian population groups there as well as the neighbourhoods' luxury market.
Economists such as Finlayson and Central 1 Credit Union's Helmut Pastrick both say more can be done to increase the supply of housing units in the market, through speedier municipal approvals for development projects.
But both also acknowledged that more rapid redevelopment and densification of single-family neighbourhoods would result in even fewer detached houses available, likely widening the price gap between multifamily units and detached houses.
Finlayson also suggested parts of the Agricultural Land Reserve that have never been productively farmed could be opened up to development.
Black Press: Pundits split on whether foreign buyers tax will cool market
The province's decision to charge a steep 15 per cent property transfer tax when foreigners buy Metro Vancouver homes may help cool the region's "bubbly and overpriced" housing market, one B.C. economist says.
Jock Finlayson, executive vice-president of the Business Council of B.C., said it should have "some effect in dampening the demand" for real estate, particularly the single-family houses that have shot up much faster in price than townhomes and condos.
He said there's some evidence the housing market is cooling already and that cooling may accelerate after the extra tax kicks in Aug. 2 on purchases by foreign nationals or companies they control.
He also noted the province's decision to apply the new tax only in Metro, at least for now, could shift the foreign appetite for B.C. real estate to neighbouring regions.
"It may in fact lead to greater foreign demand for housing in areas like the Fraser Valley, Squamish, Greater Victoria and the central Okanagan," Finlayson said.
Finance Minister Mike de Jong indicated the new tax could be extended to other parts of B.C. if needed.
Finlayson said he hopes the province uses the revenue, which will go into a Housing Priority Initiatives Fund, mainly to assist renters, who face steeply rising rents in some urban areas.
That should be a priority, he said, because home ownership, particularly detached house ownership, is "just not going to be the future" for many area residents.
Vancouver Sun Editorial: Time to fix the PST
While the defeat of the Harmonized Sales Tax in the 2011 referendum may have been a victory for democracy, it demonstrated that sometimes the people get it wrong — witness Brexit or the rise of Donald Trump.
The arguments put forward by the proponents of the HST are as valid today as they were then and the flaws of the Provincial Sales Tax have become more apparent over time.
Of course, no politician who plans to survive the next election would dare to propose bringing back the HST but there are other options.
It should be understood that the B.C. government will need more revenue to provide the programs the electorate demands, most importantly those related to health care. Ideally, it should be able to raise the necessary revenue through economic growth rather than raising taxes.
The PST fails on two counts here: First, it is focused on taxing goods when growth in the economy is increasingly being driven by services. Second, the PST is imposed on business inputs — effectively a tax penalty on productivity-enhancing investment — making it more difficult to grow the economy.
In a recent study commissioned by the Business Council of B.C., Kevin Milligan, an economic professor at UBC, laid out several options for the B.C. government to consider.
• Replace the PST with other revenue sources, such as the carbon tax.
• Improve the PST by exempting business inputs and expanding it to cover more services.
• Replace the PST with a new B.C.-VAT, an alternative form of value-added tax.
Each one presents opportunities and challenges for the government.
In the first case, replacing PST revenue with incomes taxes would shift the burden on middle-income earners, who would see no benefit from eliminating the PST and could legitimately complain that the tax is unfair. Replacing it with carbon tax revenue could erode B.C.’s tax competitiveness with other jurisdictions.
In the second case, improving the PST by expanding its coverage and providing relief for business inputs meets the test of revenue generation and fairness, but the political cost might be high as it begins to resemble the rejected HST.
Finally, a new B.C.-VAT offers greater efficiency (i.e. ease of compliance, lower collection costs to government) but the obligation falls to firms which may balk at paying a profit-insensitive tax rather than explicitly collecting it from customers on each transaction.
It is all well and good that the B.C. government has established a Commission on Tax Competitiveness chaired by economist Bev Dahlby, but with respect to the PST, the problems are well known, have been studied extensively, and the options are clear. It’s time to make a decision.
BC Business Magazine: Weekly Roundup
"What’s wrong with the PST? A new study finds it’s neither fair nor efficient. By covering goods more than services, the tax doesn’t provide sufficient revenue—plus it doesn’t support investment."
Talking Taxes with UBC Prof Kevin Milligan
UBC Prof Kevin Milligan joined Kirk LaPointe on Roundhouse Radio to talk about the pressures on the BC tax system. The discussion was based on a recent paper commissioned by the Business Council and authored by Professor Milligan.
Business in Vancouver: Province can no longer tip-toe around tax reform: report
Despite the sour taste that remains from the failed harmonized sales tax, B.C. remains in dire need of tax reform, says a new report from the Business Council of British Columbia.
Kevin Milligan, the report’s author, said the province needs to broach this prickly subject once again to ensure future financial stability.
“Whether a revamped sales tax option is too close to the HST is something that voters and politicians have to decide,” he said in an email response to Business in Vancouver. “I just hope that we can still talk about reforming the PST while respecting the HST referendum mandate.”
The report, titled Fiscal Options for Building a Prosperous British Columbia, proposes a B.C. value added tax (BC-VAT), which is similar to the HST in some respects, but differs in others.
“The BC-VAT would be billed directly to businesses, not levied directly on consumers,” said Milligan, a professor of Economics at University of British Columbia’s Vancouver School of Economics. “To the extent this was passed through to higher prices, it might end up as close to the same net impact, but the visibility would be very different. The other main difference is that B.C. could control what is taxed and what is not, without having to negotiate with Ottawa.”
Milligan noted his report has been passed along to the B.C. tax competitive commission, which will be chaired by economist Bev Dahlby. The commission’s mandate is to make business more competitive in global and national markets while analyzing tax fairness.
Originally announced in February with the provincial budget, the commission was created to modernize British Columbia’s aging tax policy, which includes a PST first implemented back in 1948. Former premier Bill Vander Zalm led a referendum in 2011 to overturn the province’s HST—which replaced the PST—a mere 13 months after its adoption.
Milligan noted in the report the global economy is shifting, becoming more competitive and complex, which adds cost pressures to employers and governments across the country.
“British Columbia is competing in a world where capital is fleeting, consumer purchases are being facilitated through technology and data, healthcare costs and social services expectations are rising and the provincial economy is tilting in favour of the services sector.”
Peter O'Neil, The Vancouver Sun: UN declaration doesn't give Canadian First Nations a veto: minister
The Trudeau government’s embrace earlier this year of a United Nations declaration does not confer on First Nations a veto on natural resource projects in their territories, according to Indigenous Affairs Minister Carolyn Bennett.
Bennett, whose statement this week was greeted positively by a B.C. business group, noted a number of authorities who have rejected the notion of a blanket and unilateral ability by First Nations to prevent projects from proceeding.
They are Assembly of First Nations Grand Chief Perry Bellegarde, the Supreme Court of Canada, and one of the authors of the UN Declaration on the Rights of Aboriginal Peoples, James Anaya.
They “do not believe this is an outright veto,” Bennett said in an interview.
Jock Finlayson, of the B.C. Business Council, said Canadian and foreign investors have been confused by mixed signals from the federal Liberals about the ultimate meaning of UNDRIP.
He said he’s “comforted” by Bennett’s assurance that a veto isn’t being conferred.
“Hopefully, the federal government’s position on this point will be consistently and intelligently communicated so that it is understood by First Nations, project proponents, and both domestic and non-Canadian investors seeking to commit capital to Canadian-based ventures,” Finlayson said.
He noted that Canadian judges have made clear that the Crown has “extensive” obligations to consult with aboriginal communities, and accommodate them.
While the main responsibility for consultation falls on the shoulders of government, “the business community recognizes that it must respectfully and meaningfully engage with aboriginal communities when looking to develop projects in First Nations’ traditional territories and also find ways to ensure that economic development benefits aboriginal Canadians.”
In a recent interview Prime Minister Justin Trudeau neither confirmed nor rejected the notion he has handed out effective political vetoes.
“What I’ve heard from business communities is they’ve recognized that ignoring community voices, trying to run roughshod across environmental concerns, has resulted in not getting … pipelines and projects built that people wanted,” he said.
BIV on Roundhouse Radio: Is Brexit good for Canada-EU free trade agreement?
Dr. Pascal Spothelfer, CEO of Genomics BC, joins Business In Vancouver on Roundhouse Radio to discuss a new initiative between his organization and the University of British Columbia that's geared toward sparking new innovations.
Later on, a panel of experts drops in to discuss how the U.K.'s decision to leave the European Union will impact future free trade agreements.
Greg Tereposky, a lawyer specializing in international trade at Borden Ladner Gervais LLP, says Canada should expect the Comprehensive Economic and Trade Agreement (CETA) with the EU to be shelved for quite some time. But this could ultimately benefit Canada.
Meanwhile, Jock Finlayson, chief policy officer at the Business Council of British Columbia, taps into the forces at work in American politics that may prevent the Trans-Pacific Partnership from being ratified.
Business in Vancouver: Anti-free trade goes mainstream
British voters’ decision in the June 23 Brexit referendum to leave the European Union sent shock waves through financial markets.
But the anti-free trade, anti-globalization sentiment behind Brexit is not confined to the U.K., and it could bode ill for other trade liberalization pacts like the Trans-Pacific Partnership (TPP), say a number of economists and political scientists.
Populist politicians in the U.K. and U.S. have tapped into a wellspring of disaffection with free trade, economic co-operation, globalization and unelected quasi-governmental bodies, from the EU to the G20 and International Monetary Fund.
“Global momentum in favour of trade liberalization has ebbed very visibly over the past few years,” said Jock Finlayson, executive vice-president and chief policy officer for the Business Council of BC (BCBC).
“The challenge is not going to be advancing trade liberalization; it’s going to be preventing and forestalling a potential descent into a protectionist kind of spiral. That is the real risk that we’re facing.”
Finlayson agreed. He said the TPP is “as good as dead.” Democratic presidential candidate Hillary Clinton has officially said she doesn’t support the TPP either.
“It appears that American politics have effectively killed the TPP,” Finlayson said.
It’s not clear whether the federal Liberal government would ratify the TPP. If it does, it might be signing onto a deal that lacks one of the country’s most important trading partners.
“If the TPP doesn’t go ahead with the 12 members, there could be the possibility that Canada and the other 10 signatories could go ahead without the U.S.,” Finlayson said.
One other trade agreement Canada has signed, but which is not yet ratified, is the Canada and European Union Comprehensive Economic and Trade Agreement (CETA).
Economists like Finlayson think that the U.K.’s exit from the EU could put that agreement in question as well.
“I think the prospects that CETA would be ratified and implemented would diminish in the event that the European Union is thrown into turmoil because the second-largest member state [had] decided to exit.”
BIV: U.K. departure from European Union could bode ill for global economy: analysts
Trade between Canada, the U.K. and the European Union is not likely to be affected much by Britain’s decision to leave the EU, say a number of Canadian economists and political scientists.
The bigger concern is that the U.K. could slide into recession and an already fragile European economy will be destabilized by the loss of its second-largest member, not to mention the potential loss of other “Eurosceptic” members following Britain out of the EU.
The U.K. is Canada’s third-largest trading partner, according to Statistics Canada. Ontario accounts for the bulk of that trade. The U.K. is B.C.’s seventh largest trading partner, according to BCStats.
Jock Finlayson, executive vice-president and chief policy officer for the Business Council of BC (BCBC), agrees that the U.K.’s withdrawal from the EU will not have much impact on trade between Canada and Britain.
“It’s the knock-on effect on Canada, including British Columbia, from an even weaker economy, recognizing it’s already weak without Brexit,” Finlayson said. “Growth is pretty tepid, at about 3% per year. The real issue here has very little to do with the direct effects on British Columbia, which would be minor. It’s the impact that Britain leaving the European Union [will] have on the global economy and on financial markets and business confidence and, frankly, political stability.”
The formal withdrawal is expected to take two years to complete.
But, in the meantime, there are fears of a U.K. recession.
Within a span of about five hours, as the votes started coming in, the British pound sank to a 31-year low, losing about 9% of its value, pushing up gold prices and safe-haven currencies like the Japanese Yen.
“All the economic modelling shows that Britain pulling out of the EU would cause Britain to go back into recession,” Finlayson said. “Growth, which is anemic anyway, in the European Union without Britain would slow somewhat compared to the status quo projection.”
However, Finlayson, who said he was disappointed by the referendum’s outcome and worried about its financial and economic fallout, added that the global economy is already fragile and does not need any additional shocks right now.
“The world backdrop is simply not positive at the moment, so you introduce a shock like this into the system, particularly in an environment where central banks have already pushed policy interest rates to zero, [and] there’s very little additional that they can do.”
The Vancouver Sun: B.C. government between rock and a hard place on new climate plan
When the B.C. Liberal government unveils its updated climate plan in the next week or two, the critical question of whether the province’s carbon tax will increase (and when) will not be answered.
In a recent interview, B.C. Environment Minister Mary Polak revealed that a provincial decision on carbon pricing is not likely until after the federal government has made its own decision on pricing, possibly late this year.
The chief concern of business interests is that B.C. is getting ahead of other jurisdictions, which could make industry uncompetitive.
B.C.’s nascent LNG industry, represented on the climate action committee by the BC LNG Alliance (which includes companies such as Shell, Chevron and Malaysian state-controlled Petronas), did not endorse the carbon increase.
The Business Council of B.C., which represents 250 major companies in the province including energy heavyweights Suncor and Encana, has argued that reduction targets set nearly a decade ago are too ambitious and the province should not increase its carbon tax until other jurisdictions catch up.
But there is no escaping the need for new initiatives to reduce emissions if the province wants to meet its far-reaching targets.
The Business Council of B.C. has argued, however, that the province’s initial greenhouse gas targets were unrealistic and didn’t take into consideration that B.C. was already a low emitter of carbon on a per-capita basis.
Alberta and Saskatchewan have significantly higher rates of carbon emission output per capita than B.C., which ranks about the same as Ontario and Quebec, according to Statistics Canada data.
B.C. should be given credit for its lower-carbon-intensive economy, with most electricity supplied by hydro power, said Business Council of B.C. president Greg D’Avignon.
He said business is not opposed to a carbon tax, only that the province needs to be careful it does not get ahead of other jurisdictions and, as result, create an uncompetitive business environment.
“What we’ve said is the carbon tax can go up, but it’s got to go up in lock-step and parity with other jurisdictions because we are still going to be ahead of most other places five years from now,” said D’Avignon.
He said there should also be a consideration of items such as tax incentives for investments that reduce greenhouse gas emissions, perhaps similar to a program to reduce acid rain in the 1980s.