It's not a job killing policy - The case of BC's revenue neutral carbon tax

This research note is based on a paper (Jobs and Climate Policy: Evidence from British Columbia’s Revenue-Neutral Carbon Tax) written by Akio Yamazaki, PhD Candidate, University of Calgary.

Key Messages

  • In 2008 the government of British Columbia (BC) implemented North America’s first revenue neutral carbon tax. It raises revenues from taxing the carbon content of fossil fuels, and redistributes the revenues back to residents of BC through reductions of other taxes, such as personal and corporate income taxes, as well as lump-sum transfers to low- income households.
  • A recent report1 showed that the per capita use of fossil fuels in BC has declined by 17% during the first four years following its implementation, which is 19% more than in the rest of Canada. Similarly, the per capita greenhouse gas (GHG) emissions have declined by 10% in BC from 2008 to 2011. Thus far, the BC carbon tax appears to be fulfilling its purpose.
  • However, critics have questioned the impact of BC’s carbon tax on employment. This research note explores the employment effects of the BC carbon tax.
  • The effect of the BC carbon tax on employment differs significantly across industries as it depends on how much energy each industry uses, and how sensitive the market demand response is for each industry.
  • Although there are winners and losers from the BC carbon tax, aggregate employment in the province increased since its introduction in 2008.
  • Understanding the effect of the BC carbon tax on employment across different industries could help design a future climate policy in BC and other jurisdictions.
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    About the Project

    The goal of this project is to shed light on the relationship between economic activity and the environment by exploring the linkages between changes in our natural capital and our measures of productivity generally, and through the construction of an environmentally adjusted measure of productivity specifically.

    While it is now commonly accepted that economic activity and the state of our environment are linked, many economic measures still fail to incorporate the environment – both the things we draw from it and the pollution we release into it. By developing and calculating measures of productivity that include natural capital, Canada may be able to better understand these linkages. This, in turn, may lead to the identification of strategies that can help Canada become more efficient and innovative in the use and protection of natural capital, and thus more productive and more prosperous.

    Using the forestry sector as a case study, this project aims to construct an environmentally adjusted measure of multifactor productivity. In doing so, we aim to add another layer of understanding to the environmental and economic performance of this sector. The proposed measure will have relevance to the Canadian economy as a whole.