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New British Columbia Gov't Hikes Carbon Tax

Tuesday, September 12, 2017

British Columbia's new NDP Government has announced that it will increase the carbon tax by CAD5 per tonne a year for four years, starting on April 1, 2018.

In a budget update, Finance Minister Carole James said that the rate per tonne of CO2 equivalent emissions will rise each year from its current level of CAD30 (USD25) until it reaches CAD50 per tonne in 2021.

In addition, the obligation on the Government that the carbon tax regime must be revenue neutral will be lifted. The revenue raised will be used "to support families and fund green initiatives to address our climate action commitments," James explained.

Carbon tax revenue is forecast to increase by an average of 11.6 percent a year over the three years to 2019-20.

To offset the impact of the increases on those on low and modest incomes, the Government will introduce improvements to the low income climate action tax credit. The maximum annual amount per adult will increase from CAD115.50 to CAD135, and the maximum annual amount per child will increase from CAD34.50 to CAD40. Single-parent families will continue to receive the adult amount for the first child in the family.

The carbon tax was introduced in 2008 at CAD10 per tonne of CO2 equivalent. It was gradually increased until it reached CAD30 per tonne in 2012. The former Liberal Government had committed to keep the rate at CAD30 per tonne until 2018.

In 2016, the Climate Leadership Team recommended an annual increase in the carbon tax of up to CAD10 per tonne from 2018. In its response to the report, the then Liberal Government said that the tax would only rise if it remained revenue-neutral and if every dollar was returned to residents in the form of tax relief.

The Pan-Canadian Framework on Clean Growth and Climate Change, signed by the federal, provincial, and territorial governments (with the exception of Saskatchewan) last December, endorsed the federal Government's proposal for a benchmark for pricing carbon pollution, to be implemented by 2018. Provinces and territories are permitted to implement either an explicit price-based system or a cap-and-trade system.

Provinces with a price-based system will be required to have a rate of CAD10 per tonne in 2018, which must increase to CAD50 per tonne by 2022. According to the Government's budget documents, because British Columbia "has had a broad-based carbon tax since 2008 at a price that exceeds the federal benchmark, it is expected that the proposed federal carbon pricing system will not apply" in the province.

The proposed rate rise was welcomed by the Pembina Institute, which has campaigned for such action. Maximilian Kniewasser, director of the Institute's B.C. climate policy program, commented: "B.C.'s carbon tax has been an economic and environmental success, and it makes sense to build on this policy."

"Well-designed policy will protect vulnerable Canadians from potential adverse impacts, and address competitiveness concerns in B.C.'s industry by maintaining a strong economy. Using revenue to increase the climate action tax credit will ensure that low- and middle-income families will also benefit from the transition to a clean energy economy."

He added: "Carbon pricing is one of the tools clean tech entrepreneurs cite as key to supporting clean innovation. By increasing the carbon tax, B.C. is providing longer term certainty and setting the foundation to build on its existing clean tech industry to become a global powerhouse in this rapidly growing sector."