When I pull up to the pumps in my small hometown on the coast of British Columbia, Canada, I pay more for a tank of gas than in California, my new home. Why? Because regardless of where gas prices hover at the moment, the B.C. government tops off every gallon with a 25-cent tax.
Complaining about gas prices is almost as ubiquitous as small talk about the weather, so it seems counterintuitive for politicians to hike costs up even further. Yet somehow the province’s Liberal party managed not only to do just that, but also to win an election centered on the issue in 2009. They did it by designing the tax in a way that benefits the province’s robust middle class.
My father, a small business owner on Vancouver Island, can’t avoid driving because he needs to travel to the properties that he appraises for work. But his priorities have shifted. “The carbon tax makes up a significant enough percent of the increasing price of fuel that it has definitely tipped the scale on how much I drive,” he says.
So when he had to replace his truck last year, he bought a more fuel-efficient model, and he bundles his errands, rather than taking a separate trip for each. “It also changes the way that I drive,” he says. “Now I’m more conscious about accelerating more slowly and driving at slower speeds because it burns less gas.”
Even the Chamber of Commerce, which represents small and medium-sized business, endorses the policy. Jon Garson, the chamber’s vice president of policy, explains that although there were some initial qualms, chamber members largely understand that the future costs of climate change are going to outweigh the costs of taking action now. As business executives, they also favored an economics-driven solution.
“The most efficient way to address greenhouse gases is to do what any economist will tell you,” Garson says: “Put a price on them.”
Lawmakers padded the blow for business by reducing the tax rates they pay as well. Corporate and small business income taxes have each been reduced by a percent and the threshold for higher tax rates has been deferred by $100,000, meaning that businesses pay a lower rate for earnings up to half a million dollars.
Even so, big businesses have been less enthusiastic about the tax, although they supported the concept when it was initially proposed. The Business Council of British Columbia, which represents the 250 largest companies in the province, contends that exports, a driver of the region’s economy, have been harmed.
Denise Dalmer, the council’s director of sustainability and environment, says that the tax has increased the price of products made in British Columbia. When BC producers export locally made goods to places without the tax, the products are relatively more expensive, putting manufacturers at a competitive disadvantage. It’s especially unfair, the business council argues, because British Columbia is a relatively small emitter compared to the rest of North America.
One particularly carbon-intensive industry that claims it has suffered as a result of the tax is cement manufacturing. When there are manufacturers just south of the border in Washington who make the same product but sell it at a cheaper price, there is an obvious discrepancy. The obvious answer? Create a better product — and that’s what B.C. has done: The two largest cement makers in the province have generated a new product that boasts a 10 percent smaller greenhouse gas footprint than conventional cement. In addition to a new selling point, these lowered emissions mean a smaller tax on the product as well.
Concerns about regional competitiveness may soon be put to rest if a recent agreement between several West Coast states is ratified. Last October, Washington and Oregon signed the Pacific Coast Action Plan on Climate and Energy, pledging to join California and British Columbia by putting a price on carbon.
California already has a cap-and-trade scheme in place, which limits the amount of emissions from the state’s largest polluters and distributes tradable permits. Big polluters can lower their emissions or buy credits from cleaner companies that don’t need them to meet their reductions requirements.
But a carbon tax has a much lower administrative burden than a cap-and-trade scheme like this. The government does not need to decide the exact level of emissions to allow, track credits and pollutant levels to prevent corruption (which has plagued cap-and-trade in Europe), or enforce the rules when companies exceed their output allowance. The tax also galvanizes broader public involvement in lowering emissions because it impacts everyone.
So while in isolation, big business north of the border might see the carbon tax as only resulting in negligible change, our potential impact as a region is significant. British Columbia has a population of 4 million. If you add the three Pacific Coast states, that number becomes 53 million residents, creating the fifth largest economy in the world. If Washington and Oregon pass a carbon tax, the West Coast could soon be the world’s first coordinated carbon pricing zone. And Washington is already making strides in that direction, as the state’s governor signed an executive order in April to accelerate the development of clean energy and to cut carbon pollution in the state.
Such a show of international cooperation could be as important as the greenhouse gas reductions that result: When international climate change negotiations have failed to produce a global deal and when the European Union recently announced that it will back away from its emissions reductions targets, the Pacific Coast Action Plan on Climate and Energy has the potential to be a rare beacon of hope on bilateral climate action.
The leadership of one Canadian province, and now western American states, is sending the message that if national governments won’t commit to building a sustainable future, smaller governments will take matters into their own hands. It will require action by more than one region in North America to slow climate change, but the closer we get to paying for the true cost of carbon and debunking the myth that doing so harms our economies, the faster other places are likely to follow suit.
Whether we do it for the planet or the economy, the sooner the better.
