British Columbia's Revenue-Neutral Carbon Tax

In 2008, B.C. introduced a broad based revenue-neutral carbon tax on the purchase and use of fuels. The tax covers approximately 70 percent of B.C.’s total greenhouse gas (GHG) emissions.

Carbon tax rates started at $10 per tonne of carbon dioxide equivalent (CO2e) emissions in 2008, increasing by $5 per tonne each year until reaching the current rate of $30 per tonne of CO2e emissions in 2012.

The carbon tax is helping to reduce GHG emissions and spur innovation. As individuals and businesses seek out cost-efficient methods to lower emissions, they increase the demand for clean solutions. This encourages businesses to develop new technologies and unlocks financing for climate-friendly investments.

From 2007 to 2014, the province has seen a 5.5% decrease in emissions, despite an 8.1% increase in population. And the province’s real GDP is up by 12.4% over the same period.

Recently the federal government announced plans for a coordinated nation-wide carbon price, which is to start at $10 per tonne in 2018 and rise to $50 per tonne by 2022. This national pricing strategy recognizes B.C.’s existing carbon price of $30 per tonne.

Revenue Neutrality

A key principle of the carbon tax is revenue neutrality, allowing the government to send a consistent price signal without increasing the overall tax burden, ensuring that British Columbia’s economy remains strong and competitive.

The province is taxing what people want to reduce – carbon pollution – and using the revenue to reduce taxes on things British Columbians want to encourage: employment, investments and economic growth. Every dollar generated by the carbon tax is returned to British Columbians through reductions in other taxes. These include:

  • A reduction of 5 percent in the first two personal income tax rates
  • A low income climate action tax credit
  • A northern and rural homeowner benefit of up to $200
  • Reductions in the general corporate income tax rate
  • Reductions in the small business corporate income tax rate
  • An industrial property tax credit

Between 2008/09 and 2015/16, the carbon tax generated about $7.3 billion and provided offsetting tax reductions of about $8.9 billion, bringing an estimated net benefit to B.C. taxpayers of $1.6 billion. These revenues and reductions are reported yearly in the Revenue Neutral Carbon Tax Plans and Reports.

Tax Rates by Fuel

Because different fuels generate different amounts of GHG emissions, the carbon tax rate of $30 per tonne must be translated based on the type of fuel used. Below are rates for select fuels:

Fuel

Tax Rate Based on $30/Tonne of Emissions

Gasoline

6.67 ¢/litre

Diesel (light fuel oil)

7.67 ¢/litre

Natural gas

5.70 ¢/cubic meter