B.C.’s carbon tax on fuels will be harmonized with Prime Minister Justin Trudeau’s federal tax as of next year, when both reach $50 a tonne, and the rapid climb to $170 by 2030 will cost jobs and increase government deficits, a new study says.
The increase is expected to cost B.C. more than 20,000 jobs over that time, push up deficits already ballooning from the costs of the COVID-19 pandemic, and shrink the national economy by about two per cent, says a study released March 16 by economist Ross McKitrick, a senior fellow at the Fraser Institute.
“The federal government has said the higher carbon tax will have ‘almost zero’ impact on the economy, but in fact, a tax of that magnitude will have significant effects on the economy and on workers across the country, including in B.C.,” McKitrick said. The findings reinforce other studies that show negative as well as positive effects of carbon tax on Canada.
B.C. pioneered retail carbon taxes in Canada, having imposed one at $30 per tonne in 2008. A decade of results show why Ottawa is poised to rapidly increase it in an effort to meet Canada’s international greenhouse gas targets. B.C.’s tax has had little impact on greenhouse gas emissions, which have risen steadily and are expected to grow significantly with the addition of liquefied natural gas exports from northeast B.C. shale gas deposits.
B.C.’s emissions rose seven per cent in 2018, the latest year of available statistics, and the province counted offsets from forest management projects to bring the net increase for 2018 to six per cent.
McKitrick also examines Prime Minister Justin Trudeau’s claim that the rapidly rising carbon tax on gasoline, diesel, natural gas and other fuels will “most likely” leave people better off, due to tax rebates based on household income.
“We find that, even after taking account of the rebates and the stimulative effect of new spending, average real household consumption falls in every province by between 0.5% and 2.2%,” the study says. “While it is possible that the government’s goal is feasible, depending on the distribution of impacts it may be diffcult to achieve in practice.
“Furthermore, it will not be feasible for the government to rebate the majority of carbon-tax revenues without increasing the federal defcit. The increased carbon tax will cause the rest of the tax base to shrink, offsetting much of the new tax revenues. If the government rebates 90% of the carbon tax revenues to households, spends the remainder, and keeps all other tax rates constant, it will permanently increase government deficits by about $24 billion annually.”
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