The Greenhouse Gas Reduction Target Act (SBC 2007, Ch. 42) requires British Columbia to reduce greenhouse gas emissions by 33% from 2007 levels by 2020 and by 80% below 2007 levels by 2050.
The provincial Climate Action Team is working to identify viable greenhouse gas reduction targets for 2012 and 2016 as required by this legislation. Legislated targets for both years are to be put in place by December 31, 2008.
One of many initiatives designed to achieve these ambitious targets was announced February 19, 2008 in the British Columbia budget - the "carbon tax". The broad-based carbon tax is to apply to retail purchases by businesses and individuals for most fossil fuels in British Columbia, such as gasoline, diesel, natural gas, coal, propane and home heating fuel. The tax is intended to be revenue neutral. It is expected the tax will bring in $1,849,000,000 over the next three years and this money is to be returned to British Columbia taxpayers through reductions to other taxes.
The tax is to commence July 1, 2008 and will be phased in over the next five years. The rates of tax vary according to the type of fuel and are set in this table.
Certain types of fuel or uses of otherwise taxable fuel will be exempt from the carbon tax, including;
- biofuels and renewable energy, such as biodiesel, ethanol, biomass, pulping liquor and wood;
- fuel exported from British Columbia for use outside the province; and
- fuel purchased in British Columbia by commercial air services or commercial marine services with respect to inter-jurisdictional use.
To achieve "revenue neutrality", the following reductions in taxes to individuals and business will be implemented:
- reduction to the general corporate income tax rate ($415,000,000);
- reduction to the small business income tax rate ($255,000,000);
- reduction to personal income tax rates ($784,000,000); and
- climate action tax credit for low income families ($395,000,000).
As well, a one-time $100 "climate action dividend" will be paid to persons resident in British Columbia on December 31, 2007. The idea is that people are to spend this money making green lifestyle choices.
The general corporate tax rate will be reduced from 12% to 11%, effective July 1, 2008. The intent is to reduce this rate to 10% by 2011. When this further reduction is implemented, BC's general corporate tax rate will be the same as Alberta's.
The small business tax rate will be reduced from 4.5% to 3.5% also effective July 1, 2008. The intent is to reduce this rate to 2.5% by 2011. (Alberta's equivalent rate is currently 3%).
With respect to individuals, income taxes payable by individuals on the first $70,000 of taxable income will be reduced effective January 1, 2008. For income less than $35,000 the current 5.35% rate will be reduced to 5.24% for 2008 and 5.06% for 2009. On income between $35,000 and $70,000 the current 8.15% tax rate will be reduced to 7.98% for 2008 and 7.7% for 2009.
The carbon tax will be applied and collected in essentially the same way that motor fuel taxes are currently dealt with. All businesses that make the first sale of fossil fuel in British Columbia will be required to collect the carbon tax. Fuel sellers will remit an amount to the government equal to the tax payable on the final retail sale. This amount will be passed on through the supply chain as an additional cost such that the fuel seller will be fully reimbursed for the carbon tax and the consumer will bear the final cost. Fuel producers and manufacturers of fuel who use fuel for their own use will be required to self-assess carbon tax.
This carbon tax will compliment other initiatives such as the British Columbia Energy Plan announced February 27, 2007. The energy plan includes:
- all new electrical projects developed in British Columbia will have zero net greenhouse gas emissions;
- existing thermal generation power plants will reach zero net greenhouse gas emissions by 2016; zero greenhouse gas emissions from coal-fired electricity generation;
- clean or renewable electricity generation will continue to account for at least 90% of total generation;
- routine flaring at oil and gas producing wells and production facilities will be eliminated by 2016 (with an interim goal to reduce flaring by 50% by 2011); and
- best coalbed practices in North America.
Similarly, in the throne speech February 12, 2008, the government outlined a new "LiveSmart BC" strategy which includes, amongst many, the following initiatives:
- new Green Building Code to be implemented;
- all new provincial public buildings will be constructed to LEED Gold or equivalent standards and existing buildings will be retrofitted to make them more energy efficient;
- legislation will require local governments to incorporate greenhouse gas reduction targets and supporting strategies in official community plans and regional growth strategies;
- legislation will be introduced to facilitate British Columbia's participation in a regional "cap and trade" system that is being developed under the Western Climate Initiative;
- British Columbia will pursue a goal of zero net deforestation and there will be a "Trees for Tomorrow" program launched with respect to urban afforestation;
- a new "Brownfields to Greenfields" redevelopment strategy will target existing "dirty" sites for the creation of well-treed, green, liveable communities;
- standards for low-carbon fuel content will be adapted to reduce carbon intensity of motor vehicle fuels by 10% by 2020;
- the legislature will be asked to adopt new California-equivalent vehicle tailpipe emission standards, in tandem with California and a number of other states and provinces;
- the Innovative Clean Energy Fund will create 100,000 solar roofs in British Columbia; new investments will be made in plug-in hybrid electric vehicles, hydrogen-powered buses, clean retrofits of dirty diesel trucks and the electrification of truck stops;
- a new Pacific Carbon Trust will foster economic growth from new opportunities in carbon credit trading and carbon offsets. The trust will invest in made-in-BC offset projects that produce emission reductions that are permanent, measurable, verifiable and additional and that are regulated by government. Projects in energy efficiency, renewable energy, carbon capture and sequestration - including incremental tree planting - will be eligible.
It is also anticipated that a comprehensive "climate action plan" is to be released by the Province in the near future. This plan is to be updated annually.
For more details on the carbon tax, see the British Columbia Ministry of Small Business and Revenue website.