Taxing Carbon in British Columbia
Jonathan Hiskes reports for Grist that Gordon Campbell and the British Columbia Liberal Party have gotten themselves re-elected in a campaign in which BC’s carbon tax was a major issue. An important piece of context to have here is that despite the name “Liberal” and their support for a carbon tax, the BC Liberal Party is the major right-of-center party in British Columbia provincial politics. The opposition New Democratic Party is the local left-wing.
It’s easy enough to understand why members of congress don’t want to go within a 100 miles of the words “carbon tax,” but I’m a bit surprised that you don’t see more interest in carbon taxes in jurisdictions that are already heavily dependent on consumption taxes for revenue. Nobody likes to say “tax” and regressive taxes—which a carbon tax would be—are in some ways especially dicey. But insofar as you’re already relying on a regressive value-added tax (VAT) to raise revenue, as most advanced democracies around the world are, it seems to me that swapping VAT revenue for carbon tax revenue should have green appeal without political toxicity. In principle, you could imagine the same thing at the state level for states that have high sales tax rates.
Unfortunately, as applied at the level of a small jurisdiction, a “green tax shift” is likely to do a lot of pushing polluting activity into other jurisdictions rather than actually eliminating the polluting activity. Still, it seems like good policy to me. You could actually imagine this, as in British Columbia, being something a right-of-center politician finds appealing.
32 Responses to “Taxing Carbon in British Columbia”
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May 14th, 2009 at 10:51 am
Although federally a proposed carbon tax caused huge, run-away-from-me problems when it was (ridiculously) castigated as a “tax on everything”, even though it was proposed as revenue neutral.
May 14th, 2009 at 11:16 am
“Right” and “left” are, of course, always relative. British Columbia is, by and large, the most left-wing province or state in North America, so the Liberal Party, which is Canada’s large left-of-center party, ends up being right-of-center in BC because there just aren’t enough people who are by national standards right-of-center for the Conservatives to be viable.
May 14th, 2009 at 11:18 am
I find myself in rare but complete agreement with Jonathan Adler today. An ideal cap and trade program would be preferrable to a carbon tax, but the cap and trade program proposed by the Waxman-Merkley bill is awful and a carbon tax would be far superior. If it’s cheaper to hire lobbyists to advocate for free emissions allowances than it is to actually cut emissions, that’s what industry will do.
May 14th, 2009 at 11:21 am
A jurisdiction making a revenue-neutral shift from a VAT or sales tax to a CO2 equivalent tax would indeed push greenhouse-gas-emitting industry to adjacent jurisdictions, but would presumably pull greener industries into the CO2eq tax jurisdiction. Since industries that emit a lot of GHG are generally dirtier, other jurisdictions have an incentive to get them to clean up somehow or swap VAT for CO2e
May 14th, 2009 at 11:23 am
A jurisdiction making a revenue-neutral shift from a VAT or sales tax to a CO2 equivalent tax would indeed push greenhouse-gas-emitting industry to adjacent jurisdictions, but would presumably pull greener industries into the CO2eq tax jurisdiction. Since industries that emit a lot of GHG are generally dirtier, other jurisdictions have an incentive to get them to clean up somehow or swap VAT for CO2eq taxes themselves.
Also, there’s the effect of the industries seeing that the handwriting is on the wall. Maybe if a firm moves operations to a new province or selects a different location for expansion, it’ll invest in less-polluting technology in anticipation of other provinces getting on board or the national government instituting some form of CO2e
May 14th, 2009 at 11:24 am
A jurisdiction making a revenue-neutral shift from a VAT or sales tax to a CO2 equivalent tax would indeed push greenhouse-gas-emitting industry to adjacent jurisdictions, but would presumably pull greener industries into the CO2eq tax jurisdiction. Since industries that emit a lot of GHG are generally dirtier, other jurisdictions have an incentive to get them to clean up somehow or swap VAT for CO2eq taxes themselves.
Also, there’s the effect of the industries seeing that the handwriting is on the wall. Maybe if a firm moves operations to a new province or selects a different location for expansion, it’ll invest in less-polluting technology in anticipation of other provinces getting on board or the national government instituting some form of CO2eq pricing.
Damn effect of the tab key! Sorry for the multiple posting.
May 14th, 2009 at 11:45 am
Jason L-The Liberal Party in BC are right of centre. If Gordon Campbell stood on a national stage it would be for the Conservatives. Similarly the NDP in BC cannot be likened to the NDP nationally. The NDP in BC are more akin to Ignatieff’s Liberals.
Matthew- A year ago the carbon tax looked like an election disaster for Campbell, but falling oil prices and people’s concerns about handing over the local economy to an untried leader saved him.
May 14th, 2009 at 11:53 am
satya @3,
Why is the case that it’s cheaper to hire lobbyists to push for cheaper or more free emissions allowances than to emit less CO2eq, but it’s not the case that it’s cheaper to hire lobbyists to push for a lower carbon tax rate or for special exemptions for certain industries? It seems your assertion could be equally applied to other regulations or revenue schemes. The continued existence of regulation and corporate tax in the U.S. suggests that your assertion, in its current unqualified state, is unsupported by the evidence.
May 14th, 2009 at 11:53 am
It would be tricky. States can’t impose tariffs on other states. If a power plant in PA supplies electricity to MD, you can’t tax the carbon emitted in PA. Any tax you place on electricity use in general would also hit hydro, solar, wind and nuclear sources of electricity. So you are left taxing only the CO2 produced in your own state. Since the electricity market is nationwide, with even some being imported to the country, you are placing a burden on your own state’s industries for a benefit diffused to the whole world.
It could even backfire. A plant with a lot of emmissions in PA might supply electricity to Marylanders more cheaply than a low emission plant in MD.
About the only aspect of it that is workable would be a politically difficult tax on gasoline at the pump. Most states don’t have refineries, so you can’t recoup for carbon emissions from gas there. Increasing taxes at the pump might drive some people to buy gas in another state, but not too many. You would probably reduce emissions, but not by much. The higher you make the tax, the more people buy in another state – using more gas to pay less money.
Implementing it nationally is hard enough, since the benefits go to the whole world. Implementing it by state is probably not a good move.
May 14th, 2009 at 11:57 am
Russell @7,
Okay, fair. That’s a rather odd state of affairs, then. Are national PMs from BC aligned similarly? Or is it just the provincial parliament?
Did it arise for historical reasons? Maybe the NDP wanted to become one of the main parties so it moved to the right into the Liberals’ territory, who were pushed to the right and pushed the Conservatives, who may have had a crappy brand in left-wing BC, off the map?
May 14th, 2009 at 12:01 pm
There is also this: with enormous hydroelectric resources, as well as sites to put wind turbines backed up by hydro storage, BC Hydro (owned by the province) looks like the dominant seller in western North America of non-CO2-emitting generation. Policy momentum to penalize GHG generation, whether through Cap’n Trade or through Carbon Tax, offer an enormous pecuniary gain to BC Hydro and its owners…much like it did in Europe to the nuclear-specialist Electricite de France.
May 14th, 2009 at 12:02 pm
Satya, there is simply no way a carbon tax could be implemented in a fashion that is anything other than an unholy mess. Look at the tax code as an example. Furthermore, wishing for a carbon tax in the US now is like wishing for a pony. It’s not on the table for many reasons, especially the one I just mentioned.
Waxman Markey’s targets can be amended in the future to be as stringent as the public demands; it is a flexible approach that gives industries time to adapt; it is far better than you give it credit for…especially considering the intense opposition to *any* action by industry and Republicans. It is a fine first step.
May 14th, 2009 at 12:07 pm
It’s easy enough to understand why members of congress don’t want to go within a 100 miles of the words “carbon tax,”
Republican lawmakers back carbon tax (yes, that’s right)
By James Rosen | McClatchy Newspapers
WASHINGTON — Reps. Bob Inglis of South Carolina and Jeff Flake of Arizona on Wednesday became the first Republican lawmakers to introduce legislation imposing a carbon tax on producers and distributors of fossil fuels.
The bill, co-sponsored by Democratic Rep. Dan Lipinski of Illinois, would set a tax of $15 a ton of carbon dioxide produced in its first year in effect, with the tax rising to $100 a ton over three decades.
May 14th, 2009 at 12:12 pm
Here in B.C., the carbon tax isn’t replacing or reducing the VAT (which is called the PST, a 7% provincial sales tax). Instead, the revenue is being used to reduce personal and corporate taxes.
The biggest impact will probably be on gasoline and home heating, which can’t move out-of-province, rather than industry. Our industries are resource-based, tourism and technology, not so much manufacturing.
Indeed, the BC carbon tax exempts some important local industrial sources: “emission leakages from gas pipelines, venting of emissions during oil and gas production, and emissions associated with the production of some metals such as aluminum.” (source)
May 14th, 2009 at 12:15 pm
10: The reason the B.C. Liberals are on the right is that around the 1950’s-60’s the non-left was so terrified of the CCF/NDP taking over that it coalesced into a single party to avoid vote splitting, and the provincial Conservative party basically folded. From then until about 1990, the default anybody-but-NDP party was actually Social Credit, but then Social Credit had a bunch of scandals and the Liberals filled the role.
The reason for this was basically that the heavily resource-dependent economy led to a very strong and militant labour movement in forestry and mining, and the ownership class was terrified of them taking over. This is less so today, but the provincial NDP still has strong links to the loggers’ unions that explain why it isn’t always that environmental (e.g. not supporting the carbon tax).
This doesn’t apply to federal members in BC at all. They belong to federal parties, and 22 of 36 of them are Conservatives.
It’s not really right to say (#7) that the BC NDP is like Ignatieff’s liberals, though. The current leadership is more centrist, but the party definitely has its hard core.
May 14th, 2009 at 12:15 pm
British Columbia also introduced a cap-and-trade system to manage other emissions, but I don’t believe it’s actually operating yet.
May 14th, 2009 at 12:52 pm
Jason L’s misunderstanding about BC politics has been corrected, but I’ll add a corollary that ties in with #15: the province probably has some of the most left-wing left-wingers in North America, but most of its right-wingers are not hugely different from Alberta’s.
(A book once described BC’s politics as “half of the province wants to hug trees while the other half wants to cut them down.”)
May 14th, 2009 at 1:04 pm
BC politics have moderated consderably — the polarization of this logging-and-mining economy is increasingly a thing of the past — as is the dependence on logging-and-mining. BC is becoming “normal”.
Gordon Campbell is an illustration of this — he came in as a right-wing firebrand. But in his second term, he introdced a carbon tax and now supports the aboriginal treaty process.
May 14th, 2009 at 1:53 pm
Gordon Campbell is an illustration of this
Presumably because the NDP has recovered somewhat from its 2001 wipeout — or, more to the point, the disastrous period that led up to Campbell’s victory?
(Looking at the results, I see that there are a bunch of squeakers that could be flipped on absentee counts: the one I pay attention to, because I know the area, is Saanich North / The Islands, and that’s currently Liberal by a couple of hundred. Of course, the Green vote was enough to make the difference.)
It’ll be interesting to see how much of a majority Campbell’s left with when the votes are counted.
May 14th, 2009 at 3:52 pm
Just want to chime in about BC politics…Contrary to what has been asserted above, BC is most certainly not the most left wing jurisdiction in Canada (and thus not in North America). As “pseud. in nc” says, while it certainly has its fair share of far left (elected) politicians, this is more than counterbalanced by the great number of knuckledraggers from the right (some of whom have ruled as premier). It is a mistake to equate the politics of East Vancouver or the hippies of Nelson with most of the rest of BC. There is a lot of wealth around Vancouver that does not vote left, and the interior is very conservative. In fact BC has some of the strongest roots of social conservatism in the country.
The BC Liberals (much like the Quebec Liberals) are not at all synonymous with the federal party. As noted above, it is an amalgam of right wing elements, including the remnants of the discredited Social Credit.
May 14th, 2009 at 5:18 pm
McKingford is very much correct. Just look at federal election results – BC sends mostly Tories to the House of Commons, with some Liberals in Vancouver and NDPers on Vancouver Island and up north. And it’s also correct that parties in Canada don’t align very evenly along the federal/provincial axis.
So which would be the most left-wing state/province? Saskatchewan has had a NDP (or CCF) government for most of the last 50 years. Quebec’s politics are notoriously left-wing, of course, but it’s got a very peculiar political division.
May 14th, 2009 at 5:41 pm
As a former British Columbian now in exile, I have to differ with most of the comments above.
First, let’s remember that the always confusing BC picture might seem even more confusing to an American without the right context. The BC Liberal Party is among the most pro-market, *fiscally* conservative political caucuses in Canada, but they are by no means the most “right wing” in the American sense. Nor, even, in the Alberta sense.
The BC Liberal Party is, in the old phrasing of BC political scientists, better nicknamed “the Free Enterprise Coalition,” a phrase applied to whoever was in the lead for the Liberals, the Socreds and an actual Liberal-Conservative coalition during various turns of the right-of-centre wheel of fortune in the last 50 years. Social conservative hayseed cracker types from the Interior have been increasingly marginalized in that coalition ever since the Liberals secured a solid, moderate base in various immigrant communities in the Vancouver suburbs in the late 1990s. The B.C. Liberals are, in fact, “liberal” in the best European sense of the word.
I think the fairest thing to say is that British Columbia isn’t the most left wing place in Canada, but it has long been the most *polarized* province in Canada, more like US politics in the harsh, two party, clear left-right divide than a place like Quebec or Nova Scotia or Manitoba where there’s a broad red tory consensus and competition is more about fighting over the margins of exactly how red, or exactly how tory.
May 14th, 2009 at 6:05 pm
As a BC Liberal myself, I feel compelled to correct that the BC Liberal Party is not at all a conservative party; it is a classical liberal party in the best 19th century British Liberal Party tradition; i.e., fierce advocacy for free markets, flexible regulation, and economic growth without much concern for social or cultural issues. The BC Liberal Party actually has no positions whatsoever regarding those issues.
The problem with the BC NDP is that it is still largely an union-dominated party, much more so than the modern British Labour party. Thus, they will almost certainly not win seats in any prosperous part of the province very soon. They have a very antagonistic view toward the big BC industries, and of course that is essentially suicide, as the BC economy is wholly dependent on the mining and forestry industries.
Leave it to me to point out the the NDP mismanaged the provincial economy so badly, that it retained only 2 out of 79 seats in the 2001 election, compared to 76 for the Liberal Party, and has since been completely discredited on any and all economic issues. I have heard from developers who were actually, genuinely going to cease new projects if the NDP was elected to government, as the trust in the economy would simply paralyse.
Hurrah for Campbell. And go suck on a big, NDP. Socialists like them can rot in hell.
And by the way, it wasn’t just the ownership classes frightened of the NDP; it was the entire middle and upper-middle class.
May 14th, 2009 at 6:07 pm
NDP’s situation is much like Old Labour’s situation in not being able to win the Home Counties, except it is much worse, with the party essentially dominated by the various public-sector unions.
The middle classes won’t vote for it. So suck on it, Carole James!
May 14th, 2009 at 7:11 pm
“And by the way, it wasn’t just the ownership classes frightened of the NDP; it was the entire middle and upper-middle class.”
This no doubt explains why the Liberals won a crushing victory of 46% to 42%.
It’s also ridiculous to say that the prosperous areas of BC don’t favour the NDP – after all, in Vancouver itself, the NDP did better, not to mention Victoria and the entire Vancouver Island.
May 14th, 2009 at 7:28 pm
It’s also ridiculous to say that the prosperous areas of BC don’t favour the NDP – after all, in Vancouver itself, the NDP did better, not to mention Victoria and the entire Vancouver Island.
You know, East Vancouver, South Burnaby, New Westminster, and North Surrey don’t count as prosperous. For god’s sake, learn your economic geography.
May 14th, 2009 at 7:44 pm
Leave it to me to point out–
Sorry, child: I already mentioned the 2001 BC election in comment 19. You were, what, still in junior high then?
But leave it to us to point out the 1993 federal election, shall we?
Oh, you silly braying fop.
May 14th, 2009 at 7:59 pm
Oh for crying out loud: Vancouver-West End isn’t prosperous? How did the Socialists win in Yaletown?
May 14th, 2009 at 8:26 pm
Oh for crying out loud: Vancouver-West End isn’t prosperous? How did the Socialists win in Yaletown?
I was thinking about that, actually. And I can’t come up with a good answer, other than that it is an anomaly.
The thing is, from a soft-liberal perspective, Gordon Campbell is absolutely fine. He’s not a knuckledragger or a bible-thumper or a complete idiot. Whereas James’s NDPers seem more like Neil Kinnock Labourites: i.e., completely unsalvageable and hopeless.
And the NDP really is quite socialistic, much more than the NDP parties of other provinces, or even the national party. Not socialistic in the sense of public ownership of industries, mind you, but in the sense of being completely tied down in the same (uncomfortable) bed with utterly intractable organised labour.
And I must add that the recent trends in the BC economy, whereby it’s become reliant not just on resource extraction, which was the old trick, but also resource financing/exploration/managent and Pacific Rim services, has made the economic vision of a drab, parochial egalitarianism, as espoused by the NDP, extremely unappealing, much more so than formerly. Look up First Quantum Minerals, for example; it doesn’t even do any mining in Canada, but rather in shitty third-world countries. Teck has a big part of its operations in tinpot republics as well. I know lawyers who formerly dealt almost with exclusively Canadian operations but now are coming to grips with issues concerning say, Mexican and (haha, what a shit country) Paraguayan issues. This increasing wealth, extracted from operations overseas, mean that there is no longer an incentive, economically, for British Columbia to bear down hard on the big owners, who are bringing home the bacon, and adding to the wealth of the city.
Same with the Pacific Rim concerns. British Columbia simply isn’t what it used to be. 15 years ago, you can make a half-decent argument about getting the most out of the mining companies and forestry companies; nowadays that argument is obsolete, as the right course of action for the provincial government, in maximising opportunities and wealth for voters, should be to help BC companies succeed in overseas operations and make profits from shit countries like Paraguay. The NDP has not adjusted to this new reality, at all.
May 14th, 2009 at 8:38 pm
I actually think the NDPers are themselves decent people. I just happen to think until such time as they wake to the possibilities of building Vancouver up to be an Antwerp/Amsterdam of the Pacific, i.e., a commercial and financial centre deriving great profit from fools in shitty tinpot republics, I don’t see why they should be in power.
God, they even opposed the Olympics, or some of them did. How can you oppose something that could turn Vancouver/Whistler into a Zurich/St. Moritz of the Western Hemisphere? Right now Vancouver isn’t even a Berne. But it could be a Zurich/Geneva. I don’t see how anyone who is incapable of perceiving that vision should be deserving of anything other than utter contempt.
May 15th, 2009 at 1:59 pm
The NDP in BC has become the party of “no” in one of the continent’s most innovative, risk-taking jurisdictions, and the party of “anti-enterprise” in one of the best places on the continent to be a socially progressive cosmopolitan entrepreneur. When the NDP last started a stretch in office in 1991, it was in part because Harcourt’s style and message seemed to embrace these trends. Glen Clark took that positive attitude and flushed it right down the toilet, both as Finance Minister and as Premier.
Nowhere is a third way makeover more overdue than in the BC NDP.
May 15th, 2009 at 7:02 pm
Myles, you are first and foremost an avowed fascist sympathizer – one who most recently came galloping to the defence of the good name of the Nazis, for fuck’s sakes. So you have all the credibility of Joseph Goebbels on any and all subjects.
Now go back to playing with your Mechano set. In traffic…