Saturday, July 31, 2010

Yo, economic fearmongers - British Columbia's carbon tax looks like success

Interesting article here - B.C.'s carbon tax is looking like a winner.
"... On July 1, 2008, B.C. embarked on an ambitious climate policy path and brought in North America's first carbon-tax shift.

Though praised by environmentalists and economists, the measure was met by a host of concerns -- that it could increase taxes, decrease growth and hurt low-income families. Some pundits labeled it political suicide.

Two years later, it is possible to make a preliminary assessment of the tax. The conclusion is that B.C.'s policy experiment seems to be working.

B.C.'s carbon tax has two parts. First, it puts a price on emissions of carbon -- the main greenhouse gas, which comes from burning oil, gas or coal. That cost is now $20/tonne (it rises by $5 annually).

Second, the revenues are returned as tax cuts for individuals and business.

What effects has this had so far? Although it's impossible to precisely identify the impacts of the tax shift in an economy with thousands of changing variables, initial results allay concerns that it would harm the economy.

In fact, B.C.'s economic growth in 2009 -- the first full year the tax was in effect -- was higher than Canada's national rate. Unemployment, although high because of wider economic events, is below the national average and does not appear to have jumped when the tax shift came in.

Perhaps more significantly, for taxpayers as a whole, the carbon-tax shift has been an economic boon. During 2008 and 2009, the tax raised $846 million. However, the province tied the carbon tax to reductions in personal and corporate income taxes as well as tax credits to offset impacts on low-income individuals. The value of these offsetting cuts was nearly $1.1 billion over those two years, meaning a net tax reduction for taxpayers of about $230 million.

While the economic effects have been negligible, the environmental impacts are expected to be positive. The province's economic modelling projects that the policy will lower greenhouse gas emissions by about five per cent. "

"The carbon tax has obvious moral appeal. By tying the pollution tax to reduced income taxes, B.C. has shifted from taxing "goods," like working and entrepreneurship, to taxing "bads," like pollution."

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