How the Carbon Tax Works


The carbon tax applies to the purchase or use of fuels within the province. The amount of GHGs emitted when a unit of fuel is burned depends fundamentally on the chemical make-up of the fuel, particularly on the amount of carbon in the fuel. That fact allows for a relatively simple administrative process for applying the carbon tax.

Administratively, the carbon tax is applied and collected in essentially the same way that motor fuel taxes are currently applied and collected, except natural gas which is collected at the retail level. This minimizes the cost of administration to government and the compliance cost to those collecting the tax on government’s behalf.

The tax rates on July 1, 2012 are based on $30 per tonne of CO2 equivalent emissions, increasing by $5 per tonne from $25 per tonne imposed since July 2011.

Since different fuels generate different amounts of GHG when burned, $30 per tonne of CO2 equivalent must be translated into tax rates for each specific type of fuel. The following table shows the per unit rates for selected fuels at July 1, 2012. For example, effective July 1, 2012 the rate for gasoline will be 6.67 cents per litre. The tax rate for diesel will be slightly higher at 7.67 cents per litre due to the higher carbon content of the fuel, while the tax on propane will be lower on a per litre basis.

Selected Carbon Tax Rates by Fuel    
 
UNITS FOR TAX
TAX RATE JULY 1, 2012
Gasoline
¢/litre
6.67
Diesel (light fuel oil)
¢/litre
7.67
Jet Fuel
¢/litre
7.83
Natural Gas
¢/cubic metre
5.70
Propane
¢/litre
4.62
Coal - high heat value
$/tonne
62.31
Coal - low heat value
$/tonne
53.31

More Carbon Tax Rates by Fuel Type

What effect will the carbon tax have on GHG emissions?

According to the IPCC 4th Assessment - Synthesis Report, “an effective carbon-price signal could realize significant mitigation potential in all sectors.” A preliminary estimate by an independent consulting company (MK Jaccard and Associates) suggests that in absence of all other GHG reduction strategies, the carbon tax alone could cause a reduction in B.C.’s emissions in 2020 by up to three million tonnes of CO2 equivalent annually. This is roughly the equivalent to the greenhouse gas emissions created by 787,000 cars per year.