Southbound Douglas Street in the greater Victoria, B.C., area. B.C.’s carbon tax reduced the use of gasoline and natural gas by seven per cent per person and there’s evidence that it spurred people to buy more fuel-efficient cars. Photo from B.C. Gov.
Climate change will be an important part of the national conversation this fall. One part of Canada’s strategy to deal with climate change has been to put a price on carbon.
What’s a price on carbon? Glad you asked. It’s a charge on fossil fuels, the main drivers of climate change.
The charge is based on how much carbon pollution (a.k.a. greenhouse gas emissions) the fuel produces when it is burned. For example, a litre of diesel produces more carbon pollution than a litre of gasoline, so the carbon price is higher on a litre of diesel. This creates an incentive to conserve energy, or look for alternative sources.
If we want our climate to remain as stable as possible, economists overwhelmingly recommend we start by putting a price on carbon. The evidence shows that it helps the environment in a way that’s best for the economy.
More to the point: carbon pricing works. It has for a long time.
Here are six places where carbon pricing has worked:
We don’t have to go far for our first example. British Columbia adopted a carbon tax in 2008 and hasn’t looked back. Its economy has grown at one of the fastest rates in Canada (the carbon tax didn’t cause this, but it sure doesn’t seem to have hurt the economy).
- How it worked: B.C.’s carbon tax reduced the use of gasolineand natural gas by seven per cent per person. There’s even evidence that it spurred people to buy more fuel-efficient cars.
- Key fact: B.C. used the revenues to cut income taxes and, more recently, to cut health premiums and invest in green technologies. It has some of the lowest income tax rates in Canada.
Northeastern United States
In 2009, 10 states, including New York and Massachusetts, worked together to put a price on carbon. They used the other type of carbon pricing: cap-and-trade. Their system is known as RGGI (Regional Greenhouse Gas Initiative), or “Reggie.”
- How it worked: Electricity producers started burning way less coal and started using more natural gas and renewable energy, which reduced greenhouse gas emissions.
- Key fact: “Reggie” improved public health. Less coal meant less soot, and these states avoided more than US$5 billion worth of asthma attacks, hospital visits, chronic illnesses and premature deaths.
Sweden has had a carbon tax since 1991. It started at €25 per tonne of greenhouse gases and is now €120 per tonne, the highest carbon tax in the world. Since implementing carbon pricing, Sweden’s economy has grown well above the European average.
- How it worked: Businesses and homes started using less coal, gas and oil for heating, and started using biofuels instead. Sweden has reduced its greenhouse gas emissions by 25 per cent since 1995. Its carbon tax was a key contributor.
- Key fact: Sweden wants to be carbon neutral by 2045 and will use pricing to help get there.