Those who’ve warned that the sky will fall on jobs and the economy if any province dares to implement a carbon tax now have egg on their faces – plus charter memberships in the Chicken Little Fan Club. British Columbia ignored those dire warnings five years ago and became the first North American jurisdiction to implement a carbon tax.

Now, a new study concludes that not only has B.C. significantly reduced fossil-fuel use and cut greenhouse gas (GHG) emissions, but these air-cleansing deeds have not killed jobs or the economy.

The study’s report, BC’s Carbon Tax Shift After Five Years: An Environmental and Economic Success Story, was authored by Stewart Elgie, an associate professor at the University of Ottawa, on behalf of Sustainable Prosperity, a national research network that focuses on market-based approaches to a stronger, greener economy.

The study found that since B.C. introduced its carbon tax on July 1, 2008, the province’s fossil-fuel consumption has been cut by almost 19% per capita, as compared with the rest of Canada, while B.C.’s gross national product has kept pace nationally. The province’s GHG emissions also have declined significantly.

But the key to this success, the study advises, hinges on the fact that all carbon tax revenue is offset by corresponding cuts in other taxes – especially income taxes. “B.C.’s experience shows that it is possible to have both a healthier environment and a strong economy by taxing pollution and lowering income taxes,” Elgie writes. “B.C. had the guts to try it, and it’s working.”

The carbon tax applies to almost all fossil fuels, including gasoline, diesel, propane, natural gas and coal. The tax also is the central component in B.C.’s climate-change strategy, which aims to reduce GHG emissions to 33% below 2007 levels by 2020.

The rate was set at $10 per tonne of carbon dioxide equivalent in 2008; but that increased by $5 per year until it reached $30 per tonne on July 1, 2012, where it was frozen for five years.

The study found that per capita consumption of the carbon-based fuels that are subject to the tax in B.C. fell by 17.4% between 2008 and 2012, while consumption increased by 1.5% in the rest of Canada.

The study also found that B.C.’s GHG emissions per capita declined by 10%, compared with a 1.1% decline in the rest of Canada – a difference of 8.9%. Yet, B.C.’s economy still slightly outperformed the rest of Canada. As the report notes: “The experience in B.C. to date is consistent with results witnessed in seven European countries that brought in carbon tax shifts in the 1990s.”

Despite these results, B.C.’s carbon tax regime still has flaws. In B.C. politicians’ zeal to break new ground, they foolishly forced schools, hospitals and universities to pay the carbon tax to a new Crown corporation, the Pacific Carbon Trust (PCT).

It was recently learned that the PCT charges these institutions higher rates than it pays private corporations in carbon-reduction credits. Consequently, the PCT now has a $30-million surplus that’s growing.

Needless to say, schools, hospitals and universities are always desperate for every dollar they can get. So, the sooner the PCT is killed, the better.

© 2013 Investment Executive. All rights reserved.