BC’s Carbon Tax Shift After Five Years:Analysis of Environmental and Economic Impacts

Stephanie CairnsOn behalf of Prof. Stewart Elgie and Jessica McClay

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BC’s Carbon Tax Shift After 5 Years:Methodology

• Focus on environmental effectiveness and economic impact

• StatsCan and Environment Canada data • Focus mainly on fossil fuels (vs GHGs)• To help isolate effects of tax

– Compared BC with rest of Canada– Examined trends pre- and post tax– Compared with non-taxed fuels

• Caution: further economic analysis needed to reach more firm conclusions about these effects and causality

Overall Fuel Use Change:BC vs Canada (2008-12)

• BC’s fuel use down 18.8% vs rest of Canada since C tax shift• So economic downturn doesn’t explain it (all provs had that)

Per capita consumption of petrol. products subject to the BC tax (% change)

2008/09 2009/10 2010/11 2011/12 2008-12 TOTAL

BC -5.4% -3.6% -2.4% -7.1% -17.4%Canada -3.4% -0.7% 3.9% 1.7% 1.5%Difference -2.1% -3.0% -6.3% -8.8% -18.8%

Source: Elgie, McClay (2013)

Other Pre-existing Drivers?

• BC & Canada tracked consistently pre-2008 on fuel efficiency, but the gap grew rapidly after 2008 when the carbon tax introduced

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

1.5

2.0

2.5

3.0

Sales of fuels subject to BC carbon tax (2000-12)

Rest of CanadaBritish ColumbiaCarbon Tax

cubi

c met

res/

capi

ta

Source: Elgie, McClay (2013)

Occurring Across All Fuel Types

*Aviation fuel is the exception (largely exempt!)

Source: Elgie, McClay (2013)* Excludes little-used fuels (Naptha, Butane)

Propane

Motor g

asolin

eDiese

l

Fuel o

il

Petroleum co

ke

Aviation fu

els*

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

Sales of specific petroleum fuels (2007/8 to 2011/12)

British ColumbiaRest of Canada

% ch

ange

in cu

bic m

etre

s per

capi

ta

GHG changes (2008-11)Per capita GHG emissions for sources covered by the BC tax (% change)

2008 2009 2010 2011 2008-11 Total

British Columbia -1.5% -6.7% -1.1% -2.4% -10.0%Rest of Canada -3.6% -3.9% -0.9% 3.9% -1.1%Difference 2.1%* -2.8% -0.2% -6.3% -8.9%

• Slightly smaller gap, maybe due to:– Shorter time (no 2012)– GHG data includes first 6 months of 2008 (pre C-tax)– Data differences?

Source: Elgie, McClay (2013)

Effects on Economy

• BC’s GDP has stayed similar to rest of Canada’s since 2008 – But carbon tax’s effect is very small part– Similar to EU experience (small positive GDP change)

• No doubt winners and losers, e.g:– Clean tech sector has doubled – Very small impacts on agriculture (est. <0.5%, prelim.)

Jurisdiction2008 2009 2010 2011

2008-11 Total

B.C.-1.16% -3.90% 1.64% 1.92%

-0.15%

Canada-0.45% -3.88% 1.91% 1.38%

-0.23%

GDP Change: BC vs Canada 2008-11

Taxpayer Impacts

• The tax shift has resulted in lower overall taxes for BCers (about $500M)

• BC now has lowest corp (tied) and personal income tax

2008/09

2009/10

2010/11

2011/12 (forecast)

306

542

741

960

7

187

124

192

Net Income Tax Rebates from the C Tax Shift ($ million)Revenues Net Rebate

Overall

• BC now has – Lowest fuel use in Canada– Lowest income tax– Healthy economy (with fast-

growing clean tech) Greenery in CanadaWe have a winnerB.C.’s carbon tax woos scepticsJul 21st 2011

“Best-designed carbon tax in the world” (Prof. Paul Ekins, University College London)