|Proposed BC Carbon tax rates for liquid fuels. Click to enlarge.|
As part of the release of its budget program for 2008, the government of the Canadian province of British Columbia announced that it intends to introduce legislation that, if passed by the Legislature, would impose a broadly-based carbon tax on the purchase and use of fossil fuels such as gasoline, diesel, natural gas, heating fuel, propane and coal. The carbon tax is also intended to apply to tires when used as fuel.
The tax rate will begin at C$10/tonne (US$9.82/tonne) of carbon dioxide equivalent (CO2e) emissions from the combustion of each fuel, and will increase in $5 annual increments to C$30/ton in 2012. The government intends the proposed carbon tax to be revenue neutral; revenues from the carbon tax will be offset through reductions in other provincial taxes.
The principle is simple. Tax carbon-emitting fuels to discourage their use, and give the money back to people, back to businesses, so they have control. They can make their own choices about how the tax affects them. At the same time, by making greener choices more commercially viable, it will stimulate innovation and open up new economic opportunities across British Columbia.—Finance Minister Carole Taylor
The carbon tax is forecast to generate approximately C$1,849 million (US$1,817 million) over three years. This revenue will be returned to businesses and individuals through a new Climate Action Credit for persons with lower incomes (C$395 million) and reductions to personal income tax rates (C$784 million), the small business income tax rate (C$255 million), and the general corporate income tax rate (C$415 million).
In addition to the revenue-neutral tax reductions, every British Columbia resident will receive a one-time, $100 Climate Action Dividend “to help people adopt greener lifestyles.” At a total cost of C$440 million, the dividend payments will be issued in June, before the new carbon tax takes effect. It is the government’s hope that British Columbians will apply the funds toward purchases that can help reduce their greenhouse gas emissions and, by doing so, the amount of carbon tax they would otherwise pay.
The carbon tax will be a consumption tax like the motor fuel tax and provincial sales tax, and will be payable at the time of retail purchase or use of fossil fuels in British Columbia. All businesses, individuals and visitors to British Columbia, who purchase or use fossil fuel in the province, will pay the carbon tax. Fuel producers and manufacturers of fuel in British Columbia, such as oil and gas companies or coal mines, who use their own fuel in the course of their operations, will also pay the carbon tax on the fuel they use.
The tax collection and remittance procedures for the carbon tax will operate much like the existing Motor Fuel Tax Act collection and remittance procedures, with fuel sellers required to pay a security equal to the tax payable on the final retail sale, and consumers required to pay the tax. Fuel sellers will collect the tax at the time the fuel is sold at retail to the final consumer.
Certain fuels, or the use of some fuels in certain circumstances, are not subject to the tax. Examples include:
Biofuels and renewable energy, such as biodiesel, ethanol, biomass, pulping liquor and wood;
Fuel exported from British Columbia for use outside the province;
Fuel purchased in British Columbia by commercial air services for use on routes that originate, or end in, British Columbia without any intervening stopovers in British Columbia, such as a flight from Vancouver to Hawaii; or for a portion of the fuel used on routes that include intervening stopovers in British Columbia not relating to the intra-BC segments;
Fuel purchased in British Columbia by commercial marine services for use by passenger-only cruise ships if used for a route that has a port of call outside of British Columbia; or for use by cargo ships or ships that carry both cargo and passengers on routes that originate or end in British Columbia without any intervening ports of call in British Columbia; or for a portion of the fuel used by cargo ships or ships that carry both cargo and passengers on routes that include intervening ports of call in British Columbia not relating to the intra-BC trips;
Fuel that is brought into the province in the supply tank of an aircraft or ship that is used in the operation of the aircraft or ship;
Fuel used as feedstock in the production of other products, such as petrochemicals or plastics;
Up to 182 litres of fuel brought into British Columbia in the supply tank of most motor vehicles, other than large commercial vehicles;
Certain fuel packaged and sold in small sealed containers;
Fuel purchased on-reserve by First Nations purchasers who qualify as Indians or bands under section 87 of the Indian Act (Canada); and
Fuel purchased by visiting forces and members of the Diplomatic and Consular Corps.
(A hat-tip to Paul!)