Wednesday, February 25, 2015

What We Can Learn from British Columbia’s Carbon Tax - by David Roberts

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For seven years, the Canadian province of British Columbia has had a carbon tax.  It is, on its own terms, a resounding success — carbon emissions are falling even as the economy continues to grow.

Not only is it effective, but it is, from a policy standpoint, incredibly elegant:
  • It is predictable, rising according to a set schedule (though it topped out in 2012 — more on that later).
  • It is broad, covering 70 percent of the province’s emissions.
  • It is simple, levied on a relatively small number of fossil fuel extractors and importers, piggybacking on an existing tax, thus requiring almost no additional administration or enforcement resources.
  • It is revenue-neutral, offset entirely by cuts to other taxes, mainly corporate and personal income.  (In fact, each year the B.C. government publishes a table showing what tax cuts were enabled by the carbon tax.)
It all sounds like an economist’s wet dream.  The one substantial flaw is that the tax remains far too low to achieve the radical reductions that will be required from B.C. (and all of the developed world) by 2050.  But then, that’s true of all extant climate policies.

How did B.C. pull off this policy triumph?

Research and advocacy group Clean Energy Canada had a simple but rather brilliant idea:  it asked!  Last fall, it interviewed 14 key figures, including some of the plan’s political architects (like B.C.’s then-premier and then-finance minister) as well as experts from business and academia who were involved in the process.

CEC has now released a report distilling what it learned from those interviews:  How to Adopt a Winning Carbon Price (pdf).  There are 10 key takeaways.  I’ll list them all, but I’m only going to dig in on a couple.  See the report for more (it’s short and readable):
  1. A carbon tax and a thriving economy can co-exist.
  2. You need strong political leadership to get a carbon tax in place. (Public concern about climate disruption helps, too.)
  3. Keep it simple:  design a policy that’s easy to administer thanks to broad coverage and minimal exemptions.
  4. Commit from day one to a schedule of price increases, and stick with it.
  5. Start with a low price.
  6. Revenue neutrality helps address private-sector concerns and makes the policy more durable.
  7. On the other hand, revenue neutrality doesn’t get you very far with voters.
  8. A carbon tax can’t do everything; it needs to be just one component of a full suite of climate policies.
  9. Prepare for motivated, vocal — and not necessarily fact-based — opposition.  You’ll need active, engaged supporters and targeted communications strategies to counter the critics.
  10. Expect a cleaner environment, an enhanced reputation, and a thriving clean technology sector.
Read more at What We Can Learn from British Columbia’s Carbon Tax

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