Overview of the British Columbia Carbon Tax
In February 2008, the government of British Columbia announced that a revenue-neutral tax on the combustion of all fossil fuels would go into effect on July 1, 2008. This legislative action made British Columbia the first North American jurisdiction to levy a tax on fossil fuel consumption with the goal of reducing carbon dioxide emission related to fossil fuel combustion.
The tax rate started at C$10 per ton of carbon dioxide (CO2) in 2008 and increased by C$5 per year until reaching C$30 per ton in 2012. The tax is included in the price of gasoline and other combustible materials purchased by consumers. For example, in 2012 the tax represented C$.067 of the C$1.40 per liter that consumers regularly paid for gasoline in Vancouver, British Columbia (Harrison, p. 10). The tax is charged to the consumer at the point of sale, but it is passed back via the retailer to the wholesaler, who is responsible for conveying the tax revenues to the province (Harrison, p. 9).
Rates vary between different combustible materials based on their relative CO2 emissions. At the initial rate of C$10 per ton of CO2 in 2008, the tax represented a levy of 2.41 cents per liter of gasoline, 2.76 cents per liter of diesel, 1.53 cents per liter of propane, 2.45 cents per liter of aviation fuel, 49.66 cents per gigajoule of natural gas, $17.72 per ton of low-heat-value coal, $20.79 per ton of high-heat-value coal, $24.87 per tone of coke, $10.22 per ton of peat, $23.91 per ton of shredded tires, and $20.80 per ton of whole tires (Duff, p. 97). By 2012, the taxes were three times that much.
British Columbia’s carbon tax applies to all greenhouse gases emitted by combustion...
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...duce carbon dioxide emissions that cause global warming by a certain, quantifiable amount. For industry groups, it offers the possibility of a new market in carbon allowances and the potential for companies to generate significant income if they can significantly and cheaply reduce their carbon emissions. For economists, cap and trade allows the market to take externalities into account while determining the price of carbon, and for politicians cap and trade offers the opportunity to combat global warming without implementing a complex regulatory permitting scheme or imposing a tax on fossil fuels.
However, carbon taxes have the advantage of preventing emissions price volatility, they are simpler to implement, and they are less susceptible to errors and uncertainties in terms of calculating the costs versus benefits of emissions reductions (Goulder & Schein, p. 23)
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