Myths and Facts About the Carbon Tax

Myth: The carbon tax is just a tax grab.

Fact: Every dollar raised by the carbon tax is returned to individuals and businesses through tax reductions. None of the carbon tax revenue is used to fund government spending.

Since it was first introduced in 2008, the carbon tax has returned $500 million more to taxpayers in tax reductions than it has raised in revenue.

Myth: Industry/business are exempt from the carbon tax.

Fact: Industry is not exempt from the carbon tax. Industry is required to pay the carbon tax on the purchase and use of fuels the same as everyone else and they also pay tax at the same rate. For example, the oil and gas industry will pay the carbon tax on all combustion of fuels, estimated at 85 per cent of their total emissions, including flaring, and the cement industry will pay the tax based on the coal and tires they burn in the production of cement.

Myth: Many emissions are not taxed.

Fact: The carbon tax has the broadest base possible given current technological, measurement and data limitations and applies to virtually all emissions from fossil fuel combustion in British Columbia captured in Environment Canada’s National Inventory Report.
The carbon tax applies to virually all emissions from burning fuels, which accounts for an estimated 70 per cent of total emissions in British Columbia.
Of the approximately 30 per cent of emissions that are not from fuels:

  • 10 per cent are from non-energy agricultural uses (e.g. emissions from enteric fermentation, manure management, and agricultural soils) and waste (landfills);
  • 10 per cent are from fugitive emissions which cannot currently be accurately measured;
  • 6 per cent are non-combustion industrial process emissions; and
  • 5 per cent are from net deforestation.

The Province will look at options to extend the carbon tax to emissions beyond those generated by the purchase and use of fuels, and integrate the carbon tax with other climate action initiates such as cap-and-trade.

Myth: The carbon tax unfairly impacts low-income British Columbians.

Fact: A major component of the personal and business income tax cuts provided as part of the revenue neutral carbon tax is the ongoing low income climate action tax credit designed to help offset the carbon tax paid by low-income individuals and families.  The credit is paid quarterly along with the federal GST credit and BC HST Credit.

The credit provides an annual maximum of $115.50 for each adult and $34.50 for each child ($115.50 for the first child in a single parent family). The maximum credit is reduced by 2 per cent of net income in excess of $31,711 for single individuals and $36,997 for families.

Myth: Government said that the carbon tax is revenue neutral for every individual.

Fact: Government said it would return every dollar collected from the carbon tax to taxpayers through tax reductions. The tax reductions for individuals and families for the years 2009/10 to 2012/13 fiscal years consist of:

  • The first two personal income tax bracket rates were reduced by 5 per cent effective January 1, 2008;
  • Low Income Climate Action tax credit paid quarterly along with the federal GST credit and BC HST Credit;
  • A Northern and Rural Homeowner benefit of up to $200 as of the 2011 taxation year.

Revenue neutrality is intended to apply to the total carbon tax revenues collected rather than on a sector by sector or individual basis. If everyone was given back the exact amount of carbon tax they paid there would be no incentive to use less fuel and reduce emissions. Some individuals, businesses, or sectors will pay more than they receive through recycling measures and some will pay less, but the carbon tax as a whole is revenue neutral. All carbon tax revenue is returned to taxpayers through tax reductions.

Myth: Government gets more tax revenue when gas prices rise.

Fact: The carbon tax, like the other B.C. fuel taxes on gasoline and diesel, is levied on a per volume basis and is not related to the selling price of the fuel. The government collects the same amount of carbon tax per litre at any price. For example, if someone bought 100 litres of gasoline after July 1, 2012 they would pay $6.67 in carbon tax when the tax is equivalent to $30 per tonne of CO2e. This is the case whether the gas costs 50 cents per litre or $2.00 per litre. In fact, to the extent that higher prices lead to lower consumption, the B.C. government will get less tax revenue.

Myth: The carbon tax applies to goods other than fuel (e.g. vehicles).

Fact: The carbon tax is only applied to the purchase and use of fuels in B.C. Therefore, it is applied to gasoline or diesel used in a motor vehicle but does not apply to the vehicle itself.

Myth: People are being double taxed because local governments have to pay the tax and because they do not get income tax reductions taxpayers will have to pay again.

Fact: All of the revenue from the carbon tax, whether from individuals, businesses, or local governments is returned to British Columbians through personal and business tax reductions.
Local governments and School Districts that commit to carbon neutrality by 2012 can access the Climate Action Revenue Incentive, a grant that offsets 100 percent of the carbon tax local governments and school districts pay.
Those municipalities that move soonest to reduce their fuel consumption create the greatest benefits for their residents. In addition to the tax reductions funded by the carbon tax, municipalities have the opportunity to pass the carbon tax and fuel savings back to their local ratepayers.

Myth: The carbon tax is just another gas tax. It does not actually tax carbon dioxide emissions.

Fact: The carbon tax is a tax on carbon dioxide equivalent (CO 2e) emissions generated from the burning of fuels in B.C. including gasoline, diesel, natural gas, fuel oil, propane and coal. It is not just a “gas tax.”
Environment Canada determines emission factors (EFs) that measure the CO2e emitted from combusting each type of fuel. The EFs are reported in Environment Canada’s “National Inventory Report, Greenhouse Gas Sources and Sinks.” The B.C. carbon tax rates for different fuels are determined by the amount of CO 2e emitted when the fuels are combusted.  

Myth: When gas prices rise by so much, there is no need for a carbon tax.

Fact: The historical volatility of gas prices, rising and then falling, has blunted the price signal for consumers and resulted in less conservation than required to meet government’s targets. The purpose of the carbon tax is to ensure that a consistent long term price signal is provided to consumers so that they continue to make the choices required to reduce their fuel use and emissions.

Myth: Many people have no alternatives and no way to reduce their emissions.

Fact: Business and individuals can choose to reduce their carbon tax by reducing usage, increasing efficiency, changing fuels, adopting new technology or any combination of these approaches. We can all begin to make the small changes towards a cleaner future that fit into our own individual circumstances, such as choosing energy efficient lights, lowering the temperature on the thermostat at night, or keeping our cars tuned-up.

Myth: The carbon tax will not have any effect on people’s behaviour.

Fact: The tax is based on the assumption that consumers respond to price signals. The purpose of the tax is to send a price signal to reduce the use of fuels and thereby emissions. Several studies show that consumers generally respond to higher gasoline prices by reducing consumption either by purchasing more fuel efficient vehicles or by driving less.
Based on new car sales data for British Columbia since 2001, it is evident that the increase in gasoline prices has caused many consumers to buy more fuel efficient vehicles. The market share of subcompact and compact passenger car sales has increased steadily while the market share of larger cars, SUVs, pickups and minivans has declined.  

Myth: The carbon tax will adversely affect the economy.

Fact: British Columbia remains committed to addressing climate change. However, four years in, the revenue-neutral B.C. Carbon Tax remains the only one of its kind in North America. As we implement the final scheduled rate increase, this is a good time to pause and examine how the carbon tax is affecting our economic competitiveness. We are beginning a comprehensive review that will cover all aspects of the carbon tax, including revenue neutrality, and will consider the impact on the competitiveness of B.C. businesses such as the agricultural sector, and in particular, B.C.’s food producers. The Province will be seeking written submissions over the summer on the revenue-neutral carbon tax to help inform the review. Submissions will be considered as part of the 2013 Budget process.

Myth: The carbon tax will have virtually no impact on reducing B.C.’s greenhouse gas emissions.

Fact: British Columbia’s carbon tax is one of the broadest and most comprehensive in the world. The fuels included in the tax base account for about 70 per cent of British Columbia’s current GHG emissions. The tax rates were deliberately set low to begin with and scheduled to rise slowly over time to send the correct price signal while giving consumers and businesses time to reduce their fuel use. It is important to look at the whole range of initiatives government is introducing to meet its targets rather than just the tax.