With British Columbia’s consumer price on carbon expected to be gone within weeks, the government is looking at a potential multi-billion dollar hole in its budget, with no easy solution to fill it.
As one of his first acts in office, new Prime Minister Mark Carney slashed the federal requirement for a carbon price to zero.
British Columbia Energy Minister Adrian Dix said his government will now follow through on a pledge to axe B.C.’s own consumer carbon price — Canada’s first — in response.
“You won’t have long to wait. The province will be introducing legislation before the end of the fiscal year, which is March 31,” Dix said.
“The premier was very clear that if the federal government acted to remove the consumer carbon tax, that we would follow suit and we are.”
According to B.C.’s 2025 budget, the consumer carbon price was forecast to generate about $2.8 billion in revenue, while about $1 billion of that is returned to the public in the form of the Climate Action Tax Credit.
Quizzed on the fate of those tax credits and how the province will make up the gap, Dix said the public will have to wait for details from B.C.’s finance minister.
Last week, B.C. Premier David Eby seemed to suggest some of it may come from major greenhouse gas emitters.
“I want to reassure people that we will be making sure the big polluters continue to pay,” Eby said.
“Not because we want them to have to be taxed, but to instead encourage them to adopt the technologies that reduce emissions to ensure we are continuing to make progress on the fight against climate change.”
Large emitters currently contribute just under $200 million to the provincial budget annually through the province’s industrial carbon price.
Mark Zacharias, executive director of Clean Energy Canada, said maintaining an industrial carbon price would be good policy.
That’s both because it is about three times as effective as the consumer price in lowering emissions and because some major trade partners like the European Union factor carbon intensity into their import policies.
“If that carbon intensity is too high, they actually put a levy on it before it comes into the country. So this provides Canada a really inherent advantage compared to the U.S.,” he said.
At the same time, Zacharias argued trying to make up much of the $1.8-billion hole in B.C.’s budget scrapping the consumer tax will create.
Raising the price too high on businesses could result in them slashing investment, or worse, moving to another jurisdiction where they are free to emit as much carbon as they wish with lower or no penalties.
“We are in a trade war with the U.S., we have a global economy that’s not looking all that healthy right now,” he said.
“Now is probably not the time to try and make up the difference in taxes from tax shifting one to the other.”
While the province works to solve its revenue problem, British Columbians should see an immediate drop in the price of some energy products like gasoline and home heating fuels.
“I think we will see a reduction in the price at the pump pretty much automatically on April 1,” UBC political scientist Kathryn Harrison said.
“Both federally and provincially at $80 a tonne that translates to between 17 and 18 cents per litre of gasoline.”
Harrison said the question now is whether the political battle will shift to the industrial carbon price with the death of the consumer price.
Conservative Leader Pierre Poilievre has already begun to make the case for scrapping that policy as well as the prospects of a spring federal election heat up.
“What will be interesting is the degree to which the carbon tax and the controversy about the carbon tax fades from the political agenda,” she said.
“Is it central or is it not in the upcoming federal election?”