We’ve beenratheroutspoken in our support of BC’s carbon tax shift. It stands out among global carbon pricing policies as particularly well-designed, for at least two reasons. First, it’s comprehensive and consistent. Most other policies around the world that put a price on carbon emissions also contain exemptions or loopholes that miss large parts of the economy, or apply different kinds of rules to different fossil fuel users. But BC’s carbon tax shift applies evenly to all CO2 emissions from fossil fuels, so it creates consistent, uniform, and economically efficient pressure to reduce climate-warming emissions. Second, BC’s tax shift, at least as it was originally structured, contained built-in economic protections for lower-income families that stand to lose the most from higher energy prices. That’s key, since a poorly-designed carbon pricing policy has the potential to fall heaviest on poor folks—the people who’ve done the least over time to generate climate-warming emissions and who have most to lose from global climate disruption.
But Marc Lee of the Canadian Center For Policy Alternatives-BC, who’s also generally a supporter of the carbon tax shift, is increasingly wary of the policy’s impact on the province’s lower-income folks.
When it was introduced back in 2008, the carbon tax dedicated about one-third of revenues to a low-income credit . . . This was a big positive with households in the bottom 40% of the distribution slightly better off on average, with credits exceeding taxes paid.
Alas, last year’s increase to $15 a tonne wiped out that gain because the low income credit barely increase in value (from $100 per adult to $105), while the carbon tax grew by 50%.
The new 2010 increment to the carbon tax will make the whole regime regressive—meaning a bigger hit to low-income families relative to their income; they will be absolutely worse off even after considering the credits.
Drat. The lesson here, perhaps, is that good things can come to an end: it takes vigilance and political pressure to keep even the best-designed of policies from morphing into a form that’s not nearly so benign.