Canada’s Carbon Taxes

Canada’s Carbon Taxes

Laser Talk

Question: Has any other national government imposed a carbon tax with dividends?

Answer:ย ย Yes: Canada, the largest importer of American goods. [1]

It started with the Canadian province of British Columbia, which took the plunge in 2008 ย [2]. By 2014, as the tax went from $10 to $30 per ton of CO2, their economy grew about 12 percent โ€” higher than the national average โ€” while carbon emissions per person went down almost 10 percent, twice as fast as the nation as a whole. [3,4] That policy recycled the revenue in the form of cuts to personal and corporate income taxes, low-income tax credits, and a property tax reduction for northern and rural homeowners.

What about the politics? The carbon tax was proposed and championed by the center-right BC Liberal Party [5] as a more market-friendly route than the cap-and-trade plan supported by their center-left opposition party. [6] Once it was implemented, the programโ€™s popularity grew from 50 to 60 percent, [7] and the rate is currently increasing by an additional $5 per ton of CO2ย each year until 2050 emissions targets are met. [8]

Encouraged by that success and by strong public support of carbon pricing, [9] the Canadian federal government now requires the remaining provinces to either adopt a strong climate policy of their own or accept a โ€œbackstopโ€ federal carbon tax. [10]

As of January 2021, seven of the 13 Canadian provinces and territories are using the federal โ€œbackstopโ€ plan. The price in 2020 was C$30 per ton of CO2, it increased by C$10 per ton until 2022, and then will increase by C$15 per ton each year until it hits C$170 per ton in 2030. [11] Ninety percent of the revenue is returned to consumers in the form of carbon tax rebates, and the Canadian Press reports that most households are getting more in rebates than they are paying in higher energy prices. [12] Thatโ€™s what we like to hear!

In a Nutshell: Canada, the largest importer of American goods, has enacted a national carbon tax with household rebates for provinces that donโ€™t already have sufficient carbon pricing of their own. Seven of their 13 jurisdictions are using that national plan which, like the Energy Innovation and Carbon Dividend Act, recycles most of the carbon cash back to households as per capita rebates.

  1. โ€œForeign Trade: Top Trading Partners โ€“ February 2021.โ€ United States Census Bureau (Feb 2021).
  2. โ€œCarbon Tax Act.โ€ 2008 Legislative Session: 4th Session, 38th Parliament.
  3. โ€œTrends in Greenhouse Gas Emissions in B.C. (1990-2014).โ€ Environmental Reporting BC (updated Aug 2016).
  4. โ€œB.C. to lead Canada in economic growth in 2015: BMO.โ€ย Business Vancouverย (May 2015).
  5. โ€œBritish Columbia Liberal Party.โ€ Wikipedia (16 Jan 2018).
  6. โ€œBritish Columbia New Democratic Party.โ€ Wikipedia (9 Jan 2018).
  7. โ€œCanadian Public Opinion About Climate Change.โ€ Environics Institute, p. 6-7 (2015).
  8. โ€œBritish Columbia government raises carbon tax, corporate tax rate.โ€ย Reuters Market Newsย (Sep 2017).
  9. Chen, R. โ€œEverything You Need To Know About A Carbon Taxโ€”And How It Would Work In Canada.โ€ย Chatelaine(Dec 2019).
  10. โ€œTechnical paper: federal carbon pricing backstop.โ€ Government of Canada (05 Jan 2018).
  11. โ€œCanada proposes rising carbon price to 2030.โ€ International Carbon Action Partnership (11 Dec 2020).
  12. โ€œMost Canadian households to get more in rebates than paid in carbon tax: PBO.โ€ The Canadian Press (4 Feb 2020).

This page was last updated on 05/06/21 at 18:50 CDT.