B.C. Liberals take time with Climate Plan 2.0

Looking ahead: There is still wiggle room to fine-tune tax implications before next election

The B.C. Liberals were not long discounting one aspect of the call from the government-appointed climate leadership team for a dramatic increase in the carbon tax, offset by a cut in the provincial sales tax.

“It’s one of their recommendations and we’ll certainly be looking at it along with the others,” Environment Minister Mary Polak said at the press conference following release of the report Friday. “But at first blush I’m not convinced that the numbers necessarily work,” she told reporters, then upgraded the assessment to: “the numbers probably don’t work.”

The government concern was the fiscal implications of the key recommendation for $10-a-year hikes in the carbon tax starting in 2018, coupled with a one-point reduction in the provincial sales tax.

The carbon tax increase would raise on the order of $400 million in the first year, whereas each point on the sales tax accounts for about $900 million a year in provincial revenues.

So “at first blush,” as Polak put it, the recommendation would appear to leave the provincial treasury half-a-billion dollars short.

The fine print in the report points to the possibility of a greater, $700-million shortfall in the first year of implementation. The climate leadership team called for additional relief for low-income, northern and rural households and for exporting industries whose competitiveness would be undercut by the hike in the tax.

Not until after the fifth year of implementation would the turnaround point be reached and revenue from the $10-a-year escalation in the carbon tax begin exceeding the cumulative drain on the treasury from the proposed relief. But as the report noted, the foregoing is only a scenario developed by Navius Research, a consulting firm specializing in climate and energy modelling that was on retainer to the team. “The estimated fiscal impacts are based on the policy assumptions used in the Navius modelling (and) as such, they need to be considered illustrative, order of magnitude estimates. A diligent analysis will need to be conducted by the Finance Ministry to fully examine the fiscal impacts.”

Further, “the climate leadership team is not suggesting to have revenue and expenditure to be out of balance.” Nor did it “explicitly recommend a PST one-per-cent cut in 2018.”

Rather, the team “suggests that government consider phasing in the tax reductions, tax credits, targeted measures for emissions-intensive, tradeexposed sectors, and other fiscal expenditures at a rate that more closely matches incremental revenue.”

All of which leaves the government some wriggle room on both sides of the tax equation.

As well as seeking public feedback on the report and its 36 broad recommendations, Clark will likely wait to discover how the new federal government intends to proceed on its pledge for stronger action on reducing greenhouse gas emissions.

For all the sniping at B.C’s carbon tax — from those who say it’s a sham to those who say climate change is a sham — the measure would appear to be in good stead with new Prime Minister Justin Trudeau.

In the New York Times this week, the PM was quoted as promoting the B.C. carbon tax as both “world class” and evidence that such taxes can be levied without harming the economy.

Still, one can regard the B.C. tax as a good beginning and argue, as the climate leadership team did, that it ought be increased every year.

The Liberals froze the carbon tax for five years at the current level of $30 per tonne of emissions as part of its 2013 election platform, a commitment underscored by Premier Christy Clark in an interview from the climate summit in Paris this week.

“We’ve frozen it until 2018,” she told Chris Gailus of Global TV on Monday.

“There’s nothing going to happen before that.”

Yet she appeared to endorse the general principle in the recommendations from the climate leadership team, that any increase in the carbon tax ought to be offset by relief from other provincial levies.

“I think there’s a broader public acceptance of carbon taxes,” Clark said.

“But what people need to know is that if you are going to add a tax for pollution, you are going to give them back the tax you collect directly in savings in their own pocket books. Not government taking it in and deciding we want to spend it on this and spend it on that and say that we’re recycling it. No way. You collect that tax, you give it back in tax cuts.”

The recycling comment can be taken as a shot at the Alberta New Democratic Party government, which is bringing a carbon tax without any offsetting reductions in other taxes.

Instead, Premier Rachel Notley announced the estimated $3-billion revenue will fund transit, other green projects and targeted grants to citizens and affected industries.

That suggests another reason why Clark may hold off laying out all of the details of what the Liberals are calling Climate Plan 2.0.

The B.C. New Democrats have already pirouetted on the carbon tax, running an “axe the tax” campaign to get rid of it in 2009, then calling for a modest (five per cent) expansion in the base in 2013 to help pay for transit, retrofits and other green initiatives.

With another provincial election approaching, Clark will be looking to see if the B.C. NDP will take a leaf from its counterparts in Alberta, and call for an increased carbon tax without the offsetting relief supported by the B.C. Liberals.