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Up for Discussion - The BC Carbon Tax

September 30, 2012
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This guest blog post is written by Christopher Gully and provided by SFU Carbon Talks, an initiative of Dialogue Fellow Shauna Sylvester. To find out more about Carbon Talks, visit their website or subscribe to their blog.

By Christopher Gully

One of the great challenges of public policy is communicating policy to the public. The public – a convenient yet limiting catchall word for a heterogeneous group with a seemingly infinite variety of perspectives and opinions – is not always going to go out of its way to become informed. The only way to ensure that policy discussions are informed and rational is to promote open, honest, and constructive dialogue based on facts and objective research.

Too often, this is not the case, and recent media coverage of the BC carbon tax has demonstrated this all too clearly. The tax was instituted four years ago, and has just recently come up for review. The review has generated significant media attention. Unfortunately, articles with headlines such as “Truth about carbon tax ignored by friends and foes”, “Taxpayers’ Federation slams BC carbon tax”, or “BC may put brakes on carbon tax” all present, to varying degrees, distortions of the truth. For the average resident of BC, these messages have the potential to create confusion, and spread misinformation.

At Carbon Talks, we believe in the power of open and informed dialogue in order to promote independent and rational decision making. Based upon this ideal, we held an event on 20 September in partnership with Sustainable Prosperity, titled “BC’s Carbon Tax Shift: What’s Working? What’s Next?” The event brought four experts to the table to present their own findings on the economic and environmental effects of the tax. On issues of revenue-neutrality, economic benefits, and the role of exemptions, it was clear that research doesn’t reflect public perception.

One of the apparent strengths of the carbon tax is its revenue-neutrality. Whatever revenue is collected through the tax is redistributed through tax cuts and credits. For reasons that remain unclear to policy-makers and analysts, the public remains skeptical on this point. Our panelists suggested that it was a matter of perception, and could be solved by, for example, indicating on a tax return how much was saved due to the carbon tax. Whatever the method, the public at large does not yet trust the revenue-neutrality of the carbon tax, and more credible and easily digestible information must be presented in order to gain that trust.

Macroeconomic effects of the tax are even more of a source of contention and misinformation. While some industries, and the Canadian Taxpayers Federation, have argued that the tax inevitably hurts the economy, once again the research figures don’t back up this argument. Even those industries significantly affected, such as cement production, are likely to only see profit margins fall on the order of 1-2%. Given the overall benefit to most consumers and the health of the economy, it is likely that such small drops will be easily countered through overall economic growth.

A final point of contention is exemptions. Some industries have argued that they cannot survive if forced to pay the carbon tax; bending to such lobbying, the BC government recently announced a one year exemption for greenhouse growers. What we learned from the panel was that there is an alternative – give such industries cash payments to directly subsidize their operations, yet also require payment of the carbon tax. In this way, the incentive to increase efficiency and reduce emissions remains, yet the tax burden is offset. As long as there are clear and measurable requirements for which industries should be assisted, a subsidy program such as this could be highly effective.

Economists and policy-makers alike have expressed a hope that other jurisdictions will implement their own carbon tax. BC has a role to play in this, but we must ensure that open, honest, informed, and constructive dialogue around the tax takes place, and the results of that dialogue are freely accessible. With the right information, objective research that shows the true effects of tax policies, and a government willing to engage its citizens, we can set an example for other provinces in Canada. At Carbon Talks, we seek to promote and facilitate such dialogue. To what degree we actually succeed is, like everything else, up for discussion.