B.C. is the first jurisdiction in North America to introduce
a broad-based revenue carbon tax. The B.C. government announced
the carbon tax as one component of its budget on February 19,
2008. Unexpectedly, criticism of the carbon tax has been muted,
with the Board of Trade calling it a "smart carbon
tax" and giving the budget an "A" grade. As
well, recent polls show that just over a majority of B.C.
citizens support the carbon tax.
How could a government introduce a new tax without incurring
a political backlash? The answer is two-fold: first, the tax is
revenue neutral and second, it starts low and then gradually
moves up over time to the expected range per tonne as carbon
The carbon tax is revenue neutral because every dollar
raised from the carbon tax must be used for the reduction of
personal and corporate income tax. The B.C. government has
committed to include this mandate in the legislation so that
neither the current nor future governments will be able to give
in to the temptation of using the carbon tax money to fund
special projects or to pay general expenses.
This approach of taxing carbon-intensive activities, while
increasing the amount of money in the economy in the hands of
businesses and consumers, reflects the B.C.
government's underlying strategy of dealing with global
environmental issues while developing the local economy.
Several times during the budget speech, Finance Minister Carole
Taylor emphasized the need to twin these two objectives.
The carbon tax is expected to generate about $1.85 billion
in the first three years, and the entire amount will be
returned to businesses and individuals in reduced income
General corporate income tax will be reduced from 12 per
cent to 11 per cent and small business corporate income tax
reduced from 4.5 per cent to 3.5 per cent from July 1, 2008.
Personal income taxes on the two lowest tax rates will be
reduced by 2 per cent in 2008 and 5 per cent in 2009.
Starting July 1, 2008, the price for carbon will be
$10/tonne and rising $5/tonne for the following 4 years. This
means that in the first year, gasoline prices will increase by
$.0241/litre and diesel by $.0276/litre. Purchase or use of
biofuels, such as biodiesel and ethanol, are exempted from the
carbon tax. B.C.'s carbon tax is similar to a
consumption tax as it is payable by the end user at the point
of purchase or use on fossil fuels in B.C.
McCarthy Tétrault Notes:
B.C.'s carbon tax is only one of a variety of
possible approaches, depending on the province's carbon
characteristics and view of the role of government. For
example, Québec introduced a form of carbon tax last
year that supports developing green technology by collecting
just under one cent a litre from petroleum companies. Its tax
raises about $200 million a year.
What may work in B.C. may not work in other provinces. In
Alberta, for example, the oil sands significantly skew that
province's carbon characteristics, just as in B.C. the
significant hydroelectric resources allow electricity
generation without significant reliance on fossil fuels.
Over the next couple of years, it is expected that each
province will introduce a variety of policies and regulations
to deal with carbon emission and economic development in their
region. Keeping abreast of these changes should prove to be a
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Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market, composed of its generators, transmitters, distributors, retailers, electricity consumers and wholesale electricity market.
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