The Case for the Carbon Tax

Author and climate scientist Thomas Pedersen says British Columbians should be proud of the lead the province took with its carbon tax.

Despite facing possible elimination, it remains an elegant solution to a global threat, he says.

In his recently released book The Carbon Tax Question: Clarifying Canada’s Most Consequential Policy Debate, the former executive director of the Pacific Institute for Climate Solutions provides an engaging political history of B.C.’s pioneering effort and takes aim at cynical politicians offering simplistic slogans aimed at killing carbon pricing.

“A single province on the westernmost side of Canada stepped up and showed all nations that fair, redistributive, broad-spectrum carbon pricing could be done and done well, without economic harm,” Pedersen wrote. “It took wisdom. It took commitment. It took vision. It was transformational. And it remains a template for the world. Let us not turn our backs on that success now.”

The book arrives as politicians at both ends of the spectrum have soured on carbon taxes.

The most recent blow came at the outset of the B.C. provincial election campaign when Premier David Eby pledged that if a federal requirement to put a price on carbon is removed, a re-elected NDP government would get rid of the carbon tax that applies to consumers, though it would continue to make big polluters pay.

The NDP’s main opponent was the Conservative Party of BC, whose leader, John Rustad, has argued climate change is not a crisis. The Conservatives pledged to end the B.C. carbon tax, as well as other policies that add to the price of fuel, even without the federal rules changing.

Rather than defend the tax in an environment where federal Conservative Leader Pierre Poilievre had been hammering for months on an “axe the tax” message and gaining support, Eby and the BC NDP instead took the issue out of the provincial discussion.

In doing so he joined federal NDP Leader Jagmeet Singh and NDP Manitoba Premier Wab Kinew in opposing the carbon tax.

During the campaign, Eby’s shift generated a muted response from environmental advocates, some of whom argue it’s time to move to less controversial tools to reduce carbon emissions.

But Pedersen insists the carbon tax is worth fighting for and that politicians just need to explain it better.

“Frankly I have a feeling of despair about what’s happened since March,” Pedersen said in a phone interview, adding that the slide goes back even further than that. “All governments in Canada, both provincially and federally, have failed miserably at communicating the carbon tax.”

In his book, Pedersen is particularly critical of the federal Liberals, saying they have “repeatedly shot the puck into their own net.”

Prime Minister Justin Trudeau has at times made efforts to explain and defend the carbon tax, including recently at the G20 leaders summit in Brazil, where he acknowledged it is “an easy political target.”

The key thing most people don’t know is how much of the revenue the government gets from the carbon tax is returned to them, said Pedersen. People with lower incomes get rebates, either as cheques or direct deposits and sales tax rebates, that until recently were so poorly marked that few understood what they were for.

In B.C., everyone also gets an income tax break, he said, pointing out that the one per cent tax cut linked to the carbon tax the government made in 2008 and 2009 remains in place. For an individual earning $70,000 a year, the income tax cut saves them more than $200 a year.

“My point is everybody in B.C. benefits from support from the carbon tax,” Pedersen said. “They don’t know that. No one ever told them that.”

Before 2017 the B.C. government pitched the carbon tax as “revenue neutral” and in each year’s budget made an effort to show how the revenue was being returned as tax cuts or credits to individuals and businesses.

When the NDP came to office, they dismissed the approach as gimmicky and ended the exercise of demonstrating revenue neutrality, but each year’s Climate Change Accountability Report still shows the amounts being spent on climate action.

Examples in the most recent report include $747 million for climate action tax credits and $1.25 billion on transit projects and suggest the province spends more than it collects from the carbon tax.

Pedersen argues for keeping the tax, returning it to being revenue neutral and increasing the direct rebates to citizens. The approach would require clearly demonstrating to taxpayers how much they are getting back from the tax and how they are benefiting.

“The Canadian public still doesn’t understand what revenue neutrality means,” he said, adding that politicians who support the tax but fail to communicate clearly are no help, leaving space for opponents to mislead the public.

Poilievre and Rustad are correct when they say the carbon tax is adding 17 cents to the price of a litre of gas — an amount set to rise to 60 cents by 2030, when the carbon tax is to hit $170 per tonne of carbon dioxide equivalent emissions.

But they are lying by omission when they ignore the ways that money is returned, Pedersen said.

Poilievre never mentions the rebates, and “John Rustad never uttered the word ‘rebate’ in any of his campaign stump speeches,” Pedersen said.

Also missing from the discussion is information about what cutting the carbon tax will mean to the provincial budget. It currently brings in about $2.5 billion a year, though the Finance Ministry does not say how much of that is from the consumer portion of the tax and how much is from industry.

The most recent accountability report also observed that “British Columbians are not well informed about the purpose and impacts of the carbon tax” and urged the province to combat misinformation by reporting how much is collected from different categories of taxpayers, how it varies among households and how it is being used.

Breaking down who pays the carbon tax is not currently possible, a Finance Ministry spokesperson said in an email. “Carbon tax is collected, and remitted to the Province, by fuel sellers where it goes into the Province’s general revenue fund,” they said. “Because it is collected from sellers, rather than purchasers, there is no ability to differentiate between carbon tax paid by consumers vs. non-consumers.”

Pedersen says he got access to pretty much every politician he approached, and key interviewees included former premiers Gordon Campbell and Christy Clark, former finance minister Carole Taylor, Campbell’s chief of staff Martyn Brown, and various cabinet ministers and MLAs. He also reports details from meetings that he was at as part of his role with the Pacific Institute for Climate Solutions, providing an inside view of the debate within the BC Liberal caucus.

Campbell’s BC Liberal government introduced the tax in 2008.

In one particularly interesting section, Pedersen quotes Campbell saying the carbon tax was a political winner for the BC Liberals. “We won in 2009 because of our position on climate,” he said. “Three or four per cent of the vote in British Columbia makes the difference between being a majority government or not, and I’m sure we got three or four per cent from people who really didn’t care much about politics but they did care about the environment.”

Pedersen said he understood Eby’s change of position was calculated to avoid losing votes to the Conservatives, but he wonders if by caving on it he in fact sacrificed a percentage or two of support that might have made a difference in winning him a stronger mandate.

And what does Pedersen make of Rustad’s argument that B.C.’s carbon tax won’t change the weather? “We need to change our behaviour,” Pedersen said. “I wish Mr. Rustad had taken any of the thousands of courses in climate science that are offered at universities and colleges across North America.”

The starting point would be to understand that weather and climate are different things, he said, that climate science is clear that over the long term the planet is warming, and that is having consequences.

For Conservatives and others who support business, addressing climate change also provides new avenues for investment, Pedersen said. “The future could be so much brighter if we recognized that the new energy revolution is upon us and we need to be proactive in seizing the opportunity,” he said. “There’s money to be made and we’re not going to make it if we’re turning our back on clean energy.”

He is complimentary about how the BC Liberals introduced and promoted the carbon tax, a “good news” story he contrasts in the book with the experience in Australia.

It’s clear the policy has lacked a strong champion since Campbell left office, he says.

The goal was to change how society operates and to reward good behaviour, Pedersen said. The carbon tax in B.C. is structured so that everyone gets money back from it, and individuals and businesses can save even more money by making changes to reduce their carbon emissions.

The B.C. economy has done well compared with other Canadian provinces, including through the years when its carbon tax was unique, he said. People are better off with the carbon tax in place, though most don’t realize it.

Already climate change is costing trillions of dollars in damage as weather gets more extreme, he said, citing the recent floods in Valencia, Spain, and the fire last summer in Jasper, among other examples.

“Yes, it’s real and it’s costing us and it’s costing us in a very big way,” he said. Households are seeing their home insurance fees rise as the industry struggles to cover its rising costs. “There’s a price that’s already being paid.”

Coming next week: Can B.C.’s carbon tax be saved? Should it be?