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The Solution
There are four clear opportunities to increase the carbon tax’s effectiveness and fairness in the 2011 budget:
1. Fix the loopholes so that it is applied equally to all emissions that can be accurately measured.
Currently, the carbon tax is not applied to industrial process emissions (e.g. aluminum, lime, cement, and natural gas production), even though they fall under B.C.’s mandatory emissions reporting rules. Removing these loopholes would increase the carbon tax’s coverage from 76% percent of B.C.’s greenhouse gas emissions to 84%. Making this change would generate over $100 million in new revenue in 2011/2012.
2. Increase protection for low-income families so that they are not adversely affected.
The 2009 budget scheduled a 10% increase in the low-income climate action tax credit in 2011. The 2011 budget should provide comparable support for 2012 and 2013 – either through expanded tax credits and/or greenhouse gas reduction efforts targeted at low-income families.
3. Commit to continue increasing the carbon tax.
The carbon tax schedule currently extends to 2012, when it will be $30 per tonne. The 2011 budget needs to specify what the price will be in 2013, and it should stay the course with continued increases. Economic modelling shows that prices on carbon will need to reach $200 per tonne by 2020 for Canada to equitably contribute to a global effort to avert dangerous climate change.
4. Invest a portion of any new carbon tax revenues in projects that reduce emissions.
All of the carbon tax revenue is currently used to lower other taxes and pay for low-income tax credits. The Carbon Tax Act should be modified to allow a portion of new revenues to be used to pay for projects that will reduce emissions. Investment should be targeted at opportunities unlikely to occur without public funding (e.g. public transit infrastructure).