The consumer carbon tax may be dead politically, after Prime Minister Mark Carney eliminated the federal version last week. But the financial fallout and budgetary headaches are just beginning for British Columbia.
Carney’s first act in office was to sign a cabinet order to cut the fuel tax rate to zero, effectively neutering the part of the carbon tax most people see at the pump on gas or diesel.
Premier David Eby was quick to say British Columbia will follow.
“Our commitment was once the federal government removed the backstop that required us to have it, we would get rid of it too,” said Eby, highlighting his flip-flop from fierce defender to opponent of the tax just before the last election.
“And that work is well under way, and we will be ending the carbon tax here in British Columbia.”
Carney’s order does not affect B.C. directly, because it has its own separate carbon tax legislation, a consequence of the province being the innovator of the tax back in 2008.
Nonetheless, once B.C. does scrap the tax, the financial impact will be severe.
B.C. will lose at least $1.8 billion in additional revenue — during a year in which it’s already projecting to run a record $11-billion deficit.
Financial officials did not include that specific calculation in the provincial budget earlier this month. To decode it, you need to combine political statements, new ministry data and the public budget documents.
It starts with a $3-billion estimate for all carbon tax revenue in 2025-26. From that, deduct the amount industrial polluters are paying under the “out-put based pricing system” wing of the carbon tax, which Eby has pledged to keep in place.
B.C. has never made that figure available before, but Finance Minister Brenda Bailey promised me during an interview to provide it. Her ministry followed through. Industrial polluters are projected to pay $199 million this year.
So, the revenue hit to the province is $2.8 billion to eliminate the consumer carbon tax.
However, Bailey and Eby suggested that B.C. could cut tax credits to British Columbians to lessen the financial impact to the treasury.
“There is a consequence of this decision, and it's a significant one for many families,” said Eby.
“They would have received what is called the CATC [climate action tax credit]. It was a carbon tax rebate cheque from the provincial government. They will not be receiving that cheque anymore and the province won't be collecting the carbon tax that paid for those cheques.”
The climate action tax credit was primarily aimed at low-income residents with household incomes between $41,000 and $57,000. It provided up to $504 per year for a single person, or $882 for a family with one child.
Were B.C. to cancel it, it would save $1.025 billion per year, reducing the revenue loss from the carbon tax to $1.8 billion.
Perhaps Eby and Bailey will cut further programs, to make up that amount. Or, increase the deficit to $12.7 billion. Or, increase the industrial side of the carbon tax (at the risk of adding financial costs to major natural resource projects Eby has promised to otherwise fast-track and support). We won’t know for sure immediately.
(Fun trivia note, $1.8 billion is the same amount it would have cost the BC NDP to follow through on its election promise for $1,000 grocery rebate cheques. The premier cancelled that promise after being re-elected, saying the province couldn’t afford it. No kidding.)
That’s the revenue side of the carbon tax cancellation.
Now the implementation.
Eby was asked Friday how he’ll prevent a scheduled April 1 carbon tax increase, and gave no answer. He can’t use a cabinet order, because the rate hikes are set in legislation. The legislature is on a break until March 31, and there won’t be enough time to introduce and pass a bill in one day.
The solution? Fudge it, apparently.
The government believes as long as it introduces the bill on March 31, it can legally ignore the April 1 hike, regardless of when the legislation is eventually passed.
All of this is very messy, to put it mildly.
The carbon tax started in controversial fashion in B.C. in 2008, and it ends in controversial fashion in 2025. The only difference is in the interim the province got addicted to the revenue. And it’s going to be difficult for British Columbia to wean off those dollars during difficult economic times.
Rob Shaw has spent more than 17 years covering B.C. politics, now reporting for CHEK News and writing for Glacier Media. He is the co-author of the national bestselling book A Matter of Confidence, host of the weekly podcast Political Capital, and a regular guest on CBC Radio.
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