In February 2008 the Government of British Columbia passed a bill that phased in a carbon tax on fossil fuels. Virtually all emissions from fuel combustion in B.C. captured in Environment Canada’s National Inventory Report are taxed, with no exemptions except those required for integration with other climate action policies in the future and for efficient administration. Beginning on July 1, 2008 the tax rate started at C$10 per metric tonne of carbon-equivalent emissions and was scheduled to increase by C$5/year for the next four years. By 2012 the rate for gasoline was 7.34 cents/litre. The tax was projected to raise $1.85B over three years, two thirds of which would come from business. In 2013/2014 the carbon tax generated C$1.212 billion. This is a "revenue-neutral" tax. The money raised is returned in some form to individuals and businesses. Based on a review by the B.C. government, the estimated reduction in provincial revenues for 2013/14 is $522 million for the personal tax measures and $710 million for the business tax measures, for a total reduction of $1,232 million. Based on these revenue and tax reduction estimates, revenue neutrality has been met for 2013/14. The reduction in provincial revenue exceeds the $1,212 million in carbon tax revenue by $20 million.
In the Globe and Mail this morning Ross Beaty (chairman of Pan American Silver Corp. and Alterra Power) Richard Lipsey (professor emeritus of economics at Simon Fraser University) and Stewart Elgie (professor of law and economics at the University of Ottawa) have published an article on British Columbia's (B.C.) carbon tax based on recent data from Statistics Canada (StatsCan).
British Columbia’s carbon tax rose gradually to the current C$30 per tonne or about 7 cents per litre of gas. To satisfy the revenue-neutral requirement, the provincial government has cut C$760-million more in income and other taxes than was strictly needed to offset the revenue from the carbon tax (with additional cuts benefiting low-income and rural residents). B.C. now has the lowest personal income tax rate in Canada and one of the lowest corporate rates in North America.
It has also been effective in addressing carbon pollution. Since the tax came in, combustion of fossil fossil fuels in B.C. has dropped by 16 %. Over the same period fossil fuel use in the rest of Canada rose by 3 % for the fuels covered by the tax. According to the authors the carbon tax has been the major driver of these fossil fuel use reductions in B.C. It's estimated that B.C.'s carbon tax could reduce emissions in 2020 by up to three million tonnes of CO2e emissions annually. The carbon tax is an important component of B.C.’s plan to reduce greenhouse gas emissions by 33 % by 2020.
The carbon tax doesn't seem to have had a negative effect on the B.C. economy. Since 2008 B.C.’s gross domestic product (GDP) has slightly outperformed the rest of Canada.
B.C.’s carbon tax has received praise as a model for the world from organizations such as the OECD.
Last year the French Government announced a tax on all fossil fuels in proportion to the emissions they generate. It is estimated that the tax will generate € 4 billion by 2016. A number of other jurisidiction have also implemented a carbon tax.