What is a Carbon Tax?


A carbon tax is usually defined as a tax based on greenhouse gas emissions (GHG) generated from burning fuels. It puts a price on each tonne of GHG emitted, sending a price signal that will, over time, elicit a powerful market response across the entire economy, resulting in reduced emissions. It has the advantage of providing an incentive without favouring any one way of reducing emissions over another. By reducing fuel consumption, increasing fuel efficiency, using cleaner fuels and adopting new technology, businesses and individuals can reduce the amount they pay in carbon tax, or even offset it altogether.

The British Columbia revenue-neutral carbon tax is based on the following principles:

  • All carbon tax revenue is recycled through tax reductions – The government has a legal requirement to present an annual plan to the legislature demonstrating how all of the carbon tax revenue will be returned to taxpayers through tax reductions. The money will not be used to fund government programs.
  • The tax rate started low and increases gradually – Starting at a low rate gave individuals and businesses time to make adjustments and respects decisions made prior to the announcement of the tax.
  • Low-income individuals and families are protected – A refundable Low Income Climate Action Tax Credit is designed to help offset the carbon tax paid by low-income individuals and families.
  • The tax has the broadest possible base – Virtually all emissions from fuel combustion in B.C. captured in Environment Canada’s National Inventory Report are taxed, with no exemptions except those required for integration with other climate action policies in the future and for efficient administration.
  • The tax will be integrated with other measures – The carbon tax will not, on its own, meet B.C.’s emission-reduction targets, but it is a key element in the strategy. The carbon tax and complementary measures such as a “cap and trade” system will be integrated as these other measures are designed and implemented.