Sunday, March 02, 2008

Carbon Tax Coming to BC

Speaking of British Columbia in the previous post, I look forward to seeing the results of their attempts to impose a carbon tax.

Let's have a look at highlights from a Vancouver Sun article.

(Finance Minister Carole) Taylor said the new carbon tax will kick in July 1. Initially, drivers will pay about 2.4 cents per litre more for gasoline at the pumps.

The tax will apply to virtually all fossil fuels, including gasoline, diesel, natural gas, coal, propane and home-heating fuel. It will rise each year, reaching 7.2 cents per litre of gasoline -- and comparable amounts on other fuels -- by 2012.

After that, Taylor said, it will be up to the government of the day to decide what to do with the tax.

If you drive a Prius hybrid, the government estimates the new tax will cost you about $20 extra per year at the outset, rising to $60 by 2012. If you drive a Dodge Ram pickup truck, the additional cost will be closer to $68, rising to about $204 by 2012.

Ah, but will the hybrid help you compensate for...never mind. ;-) I do like seeing these numbers included though. If people struggle to relate to the cost of pollution, they can usually relate to the impact on their wallets.

If you use natural gas to heat your home and water, the carbon tax will push up your costs an average $60 this year, rising to $180 by July 2012 -- unless you change your current heating or water-use patterns.

This is where I find many people need to smarten up; home heating and cooling. We know people who keep their houses at 22 in the winter and 17 in the summer. It's insane on a financial basis, if nothing else.

First off, we actually keep the house at 17 in the winter. But every curtain and blind in the house is open. The heat from the sun alone heats the house to 21, so the furnace doesn't run most of the afternoon. And no, I don't walk around the house wearing four layers and gloves.

Having the air-conditioning at 17 in the summer is even more stupid. I think of it this way; if you went on a Caribbean vacation in February, and it was 17 degrees the whole time you were there, you'd probably be a little disappointed. Well, hell, don't do it at home then! Keep the AC at 20 or thereabouts so it's still a refreshing change from the heat and humidity outside, but there's no need to waste energy and coin by simulating Antarctica in your living room.

Hydro rates are also expected to go up, though those increases are not directly linked to the carbon tax and so will not be balanced by any tax breaks. Hydro rates are expected to increase $60 this year, and another $60 next year.

To help people deal with these increases, the government is offering incentives such as provincial sales tax exemptions for energy-efficient appliances and other tax relief for the purchase of fuel-efficient vehicles.

To help people adjust to the tax -- which seeks to achieve about 7.5 per cent of the government's legislated reductions by 2020 -- all British Columbians will receive a one-time $100 cheque in June.

"We want to bring in the benefits first," Taylor said. She added that the one-time payment will be in addition to the matching tax reductions and credits.

To make the carbon tax truly revenue-neutral, Taylor said, corporate taxes will drop from 12 per cent to 11 per cent on July 1, and then to 10 per cent by 2011.

Small-business taxes will also be cut, from the current 4.5 per cent to 3.5 per cent on July 1, and then down to 2.5 per cent by 2011.

Personal provincial income taxes will be cut by five per cent in 2009 for the first $70,000 of earnings.

Lower-income British Columbians will receive further credits in the form of an annual "climate action credit" of $100 per adult and $30 per child.

I like that the article makes it clear that this is a tax shift, not an increase. Very often, a carbon tax is described as an additional tax as opposed to a redistribution.

I actually look forward to criticism about this. Further in the article, one person comments that the increase in gas prices did not stop people from driving, so adding a little more to it will likely accomplish nothing. I did a quick search to try to find out how successful this has been in parts of Europe but I have yet to locate anything decisive (probably because it has yet to be fully determined). So let's make it a date to review this in 2011 and see where things stand.

1 comment:

Anonymous said...

This is all fine and dandy. But as is usually the case, i am afraid it will end up being the low and middle income people who will feel the pinch. Most high income people will just pay and not care too much.