Bill Henderson: B.C.’s carbon tax reveals lessons not yet learned about carbon pricing
Climate change is no longer deniable and there has been a bloom of op-eds and editorials advocating for carbon pricing action. B.C.’s carbon tax is often cited as an example of carbon pricing that reduces emissions without negatively effecting the economy. B.C. has cut emissions by around 20 percent since 2008 and still has managed to have one of the strongest growing economies in Canada.
But if your concern is your kids' future—all of our kids' future, a safe climate future for all subsequent generations—then the main lesson to be learned is that it is far too late for market-based instruments like carbon pricing that work incrementally within our continuing economy.
The lesson to be learned is that we are rapidly losing our last opportunity to stay under an internationally agreed-upon guardrail protecting from the civilization-threatening, maybe even humanity-threatening, consequences of dangerous climate change.
The lesson to be learned is that even now the powers that be in our society remain in denial about the scale of emission reduction needed immediately in order to stay under a 2°C rise in temperature. Carbon pricing at this late date is just another chapter in our "solution aversion" history of not facing up to our emission reduction obligations to future generations.
Grist's top climate columnist Dave Roberts has written a long, admiring column on how the Gordon Campbell government formulated and implemented an actual carbon tax that worked and was accepted and is now lauded as an example for carbon pricing. But Roberts was wasting a lot of paragraphs and readers' time if he was scoping out what would make this form of carbon pricing acceptable in the U.S. and globally.
Why? Well, in Roberts’s third paragraph we get a hint about the basic problem with B.C.’s carbon tax:
The one substantial flaw is that the tax remains far too low to achieve the radical reductions that will be required from B.C. (and all of the developed world) by 2050. But then, that’s true of all extant climate policies.
A pretty substantial flaw. In fact, Roberts underplays just how far too low are the emission reductions achieved and he doesn’t mention how B.C.’s carbon tax wasted a precious half decade of ebbing opportunity to stay under 2°C.
What is the scale of emission reduction needed this decade in B.C. (and in similar jurisdictions like the rest of Canada and the U.S.)? The emerging carbon budget science is, surprisingly, a strong climate science argument against carbon pricing. After we look at this carbon budget science we will return to lessons from B.C.’s carbon tax.
In 2008—the same year that B.C.’s carbon tax was implemented—Colin Campbell and Cliff Stainsby published a paper on emission reduction in B.C. The authors predicted that B.C. would use up its 2°C carbon budget for the whole 21st century in just seven-and-a-half years, which would mean sometime this year.
This slide from Prof. H.J. Schellnhuber illustrates the central lesson of the Campbell-Stainsby paper: if you have a 20 tonne per capita annual carbon footprint and a fair global deal would mean a per capita budget of around two tonnes, then every year of delay you are using up a decade of your budget. Immediate steep emission reduction is the only path to staying safely under 2°C.
People usually react dismissively to Schellnhuber’s graph: "nearly 100 percent emission reduction by 2020—that’s impossible". But Schellnhuber is a foremost climate scientist and he is just graphing the reality after at least two decades of time wasting. His equity methodology isn’t the only way to calculate a global carbon budget to stay under 2°C, but it is a fair ballpark estimate that should be a wake-up call.
Pricing carbon has the wrong policy shape. B.C.’s puny carbon tax just wasted very precious time. B.C. still has a near 20 tonne footprint (with LNG to come). Soon B.C. will start using up the carbon budget that should be the development space for the three billion whose carbon footprint has never been above two tonnes.
Carbon taxes or cap and trade can be implemented to effectively reduce emissions. If it was the 1980s, putting a price on carbon within our existing market-based socio-economy would probably be our most effective tool for lowering GHG emissions and transitioning to a post-fossil fuel economy. But by 2008 and certainly now in 2015, it is far too late because pricing carbon without threatening everybody’s businesses and jobs requires a long tapering-in period and a price the economy can bear, a puny B.C.-sized price far below the hefty three-digit price now required.
B.C. activist and author Guy Dauncey has just published The 2040 Imperative, which does the carbon budget math for B.C. He cites the 19 percent reduction achieved by the B.C. carbon tax in its first four years but concludes that to stay under 2°C we should be reducing emissions by 20 percent every year. And, because we now use up such a large fraction of our carbon budget in each wasted year, we need that 20 percent annual reduction immediately. (The 2040 Imperative is an eye-opening must read—for its policy and technical implications as well as Dauncey’s very informing climate math.)
But wasn’t B.C.’s carbon tax just a beginning? And isn’t carbon pricing just one of many "wedges" reducing emissions? And isn’t B.C.’s carbon tax actually doing something, acting today, what we should be doing to fight climate change, B.C. being one of the few jurisdictions in the world that is reducing instead of growing GHG emissions? And didn’t BC’s economy thrive anyway?
Yes, yes, yes, and yes.
The Campbell government hoped that B.C.’s leadership would be followed by, first, North American partners, then a global carbon pricing mechanism so that B.C. trade in the global economy wouldn’t be disadvantaged. But even an economy-friendly (puny and ineffectual) carbon tax can be a hard political sell in insecure economic times. Every year a higher price is needed to reduce the carbon budget emissions effectively and every year it gets more difficult to implement any variant of carbon pricing.
Each of the wedges—“all extant climate policies”—is limited in implementation within continuing business as usual, within the continuing market-based economy without government action. Like carbon pricing, renewables, efficiency, electrification, forestry and agriculture, smart cities, et cetera can each deliver but a fraction of the emissions reduction needed, now, after several wasted decades, as our carbon budget is rapidly being used up by the developed world's rich half billion with high individual carbon footprints.
The Campbell government did provide leadership and many British Columbians take pride in acting against climate change, and the success of the tax and that the economy thrived is a positive consciousness raiser.
But British Columbians, and interested and informed publics worldwide, have been wrongfooted again about climate change: there are many forms of actions possible that could have been much more effective. Even after wasted decades and given the scale of change necessary, only market-based instruments and policies have been allowed. Quietly, and with little or no debate, this is giving up on 2°C—giving up what we know is right for our kids' future.
Regulation to restrict any new fossil fuel infrastructure investment or to restrict manufacture of any new fossil fuel-powered cars and trucks; a regulation schedule to reduce all fossil fuel production and a sizable three-digit price on any imported fossil fuels: these are examples of policies that could effectively reduce emissions of a scale needed.
But this type of command and control government is heretical, against the global economy rules (the golden straightjacket), and certain economic suicide if implemented by any one jurisdiction in an Albanian disregard of interdependent complexity.
Each of these regulating policies will eventually have to be implemented—probably again too late. Leadership by business coordinating with governments could have these regulations effectively reducing emissions today with only minimal long-term pain—but there is no such leadership. Such enlightened coordination could also shift subsidies from fossil fuels to renewables, transform transportation, and relocalize and powerdown economies. A debt Jubilee could unblock significant paths to both much better climate and economic futures. (But who will take a haircut?)
The most important lesson to be learned from B.C.’s carbon tax by those who take climate change seriously and want to do the right thing by our kids, and who recognize the probable suite of dangers labeled dangerous climate change, is that no, B.C.’s carbon tax wasn’t a good start; it was well intentioned but ultimately was the wrong shaped policy.
B.C.’s carbon tax wasn’t nearly effective enough, and, most importantly, continues to mis-educate. We need to take climate change more seriously than temporal political and business considerations.
The irony is that because market-friendly instruments weren’t effectively applied in the last century, now command and control-style policies that intrude into, constrain, and quite possibly damage existing economic actors are needed to stay under 2°C, to stay even semi-safe from dangerous climate change. But because the solution gets ever more unpalatable, solution aversion restricts our thinking to carbon pricing and renewable techno-miracles, et cetera, long after that window of opportunity has closed.
Solution aversion kept us from effective emission reduction with instruments like carbon pricing and now, after that window of opportunity has closed, solution aversion keeps us from even discussing and debating paths to effective mitigation that are still possible.
As climate change worsens and as the predictive science gets more exact and harder to deny, it should be clear to business leaders with vision that organized deep systemic change, if not command and control government, is needed to protect a future for business.
But the bloom of op-eds and editorials advocating carbon pricing, with no leadership voices at all allowed to advocate for much more effective policies, suggests that the solution aversion, we-are-focused-on-the-economy-first mindset—implicatory denial, trying to shoehorn climate into BAU—continues to block urgently needed emission reduction.
“Anyone who 'gets' the urgency of the climate issue and the scale of economic transformation it necessitates, is bewildered by those who don’t. How can so many otherwise intelligent and logical people – such as company executives, politicians and investment managers – not see the obvious urgency or the equally obvious economic risk? It is so illogical it can only be seen as denial.” - Paul Gilding
Mar 2, 2015 at 8:09pm
No mention is ever made about the other costs related to the increase price difference between the regions on are Borders . The Hundreds of Millions of dollars in retail sales that went to Washington State and Alberta . How the price difference was the driver that sent BC consumers pouring over the borders . While there, they purchased many forms of goods, aside from gas. All those revenues are permanently lost ! Thousands of cars idled in Long Border Line Ups Driving Hundreds of miles in additional mileage to achieve Fuel Savings Many took Portable Gas containers three and four 5 Gallon Cans a trip .Small Business's sent Trucks with Large Tidy tanks . What exactly was the " Gain" Other then filling the Tax cupboards in Washington State AND wasting Hours of time for the Lower Middle Class Families attempting to SQUEEZE a Nickel Again the Poor and people not able to right off the transportation costs to just get to work paid the price in Money and Time avoiding this Silly experiment
Mar 2, 2015 at 10:04pm
Bang on Bill!!!!. Carbon taxes are really just a distraction - too little too late.
Just sayin' Bill, but France went from nutin' to almost 80% zero carbon nuke in a little over 10 years and that included a conversion to electric heat. The technology to complete the transfer with transportation synfuels and EV's wasn't there then but it is now. The cost all in would be less than it costs to just operate with fossil fuels while ending the loss of millions of lives every year from breathin' the smoke.
With our politicians and media in the pockets of the oil companies and their bankers, its not likely going to happen here, but the technocrats now running China have seen the light and are well on the way to the transformation. Once they've bankrupted our economies perhaps we can follow them into the light.
Mar 3, 2015 at 8:54am
Carole James tried to raise this point in 2009, and the response from environmental groups like the David Suzuki Foundation was to attack the NDP. The idea that a "revenue-neutral" carbon tax was going to actually curb greenhouse gas emissions was ludicrous - it just shifted money from one pocket to the other, and people just as easily reached into the latter pocket to burn more carbon.
Just as ludicrous as cutting income taxes 25% without reducing program spending when the Liberals first came to power in 2001. But hey, whatever gets the idiots over that recurring trauma about the Fast Ferries...