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British Columbia Carbon Tax

March 12, 2008

On February 19th, Carole Taylor, British Columbia's Minister of Finance released the 2008 budget for the province. If approved by the legislature, the budget will include a carbon tax on nearly all fossil fuels to curb demand and reduce green house gas emissions.

The announcement reflects a growing trend in environmental initiatives being undertaken by provincial governments. Quebec and now British Columbia both provide examples of the introduction of structures for managing environmental compliance. While no action is currently being undertaken in Ontario to initiate a carbon tax, the move by the British Columbia government will prompt many consumers to evaluate the potential of such a tax here.

The British Columbia carbon tax will be phased in between 2008 and 2012, initially at a rate based on $10 per tonne of associated carbon dioxide emissions and rising by $5 per tonne for each of the next four years. In 2012, this will put the carbon tax at $30 per tonne of carbon emissions.

Were this system to be implemented in Ontario, the estimated impact on the price of power generated by fossil fuels would be as follows:

What would this program add the cost power in Ontario?

  Price per tonne Total cost ($millions) Cost per MWh of fossil fuel generation Cost per MWh of total generation
2008
$ 10.00
$ 337
$ 8.63
$ 2.17
2009
$ 15.00
$ 506
$ 12.95
$ 3.26
2010
$ 20.00
$ 674
$ 17.26
$ 4.35
2011
$ 25.00
$ 843
$ 21.58
$ 5.44
2012
$ 30.00
$ 1,011
$ 25.89
$ 6.52

(assumption: 2007 generation fuel mix, no coal replacement)

B.C. consumers will see the impact of this tax on all carbon products. The estimated impact on gasoline, diesel and heating oil would be 2.4-2.8 cents a litre in 2008, rising to 7.2-8.3 cents a litre in 2012. On natural gas, the tax would add about 50¢/GJ in 2008, rising to $1.50/GJ in 2012.

The intention is that the carbon tax will be revenue neutral, with all proceeds being returned to taxpayers in the form of reductions to other taxes.

While Ontario currently does not have any expressed plans for introducing a similar tax, the introduction of a carbon tax in British Columbia highlights the need to consider future costs associated with energy consumption.

Additional information about British Columbia's carbon tax can be found in their Backgrounder on the tax.

http://www.bcbudget.gov.bc.ca/2008/backgrounders/
2008_Backgrounder_Carbon_Tax.pdf

 
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