The Carbon Tax Question: Clarifying Canada’s Most Consequential Policy Debate

Review By Patrick Baylis

November 5, 2024

It’s 2024, and they’re coming for our carbon tax—again. When it comes to the politics of pricing carbon emissions in British Columbia, time is a flat circle. That’s the impression left after reading The Carbon Tax Question, a recent book by Thomas F. Pedersen. Primarily a political history of BC’s carbon tax policy over the last two decades, the book documents the unusual ecological, political, and cultural circumstances that led to the BC carbon tax, as well as the challenges it has faced since becoming law.

Anyone interested in environmental policy will find much to appreciate here. In the early chapters, Pedersen describes how the mountain pine beetle, a global climate movement, and favourable political conditions allowed Gordon Campbell’s government to implement the first broad-based carbon tax in North America nearly overnight in 2008. The tax faced its first major test soon after due to the BC NDP’s unsuccessful 2009 campaign that included a promise to “axe the tax.”

Pedersen’s role on a committee that advised the Christy Clark administration lends his retelling weight. He relays how that committee’s recommendations went mostly unheeded as the tax was frozen at $30 per ton in 2012. But the 2017 unfreezing of the tax by the BC NDP—now back on the side of carbon pricing—and the 2018 launch of Canada’s federal carbon pricing policy provide two brief moments of victory for fans of sound environmental policy. They are short-lived, as Pedersen brings us up to the present, where the tax (once again) faces an existential crisis at the hands of an NDP party that has (once again) abandoned it in search of electoral victory.

Aside from being timely, the book is both informative and highly readable. Pedersen has done an excellent job synthesizing twenty plus years into an account the average reader will enjoy. His evident support for the BC carbon tax and carbon pricing writ large is clear throughout, as are his reservations about those who oppose it. As an economist, I strongly agree with Pedersen that a well-designed carbon tax is a key component of sensible, forward-looking environmental policy. Climate change is real, and human-caused. Putting a price on carbon ensures that corporations and consumers take damages from emissions into account when making decisions.

His assessment of why the tax has become a political liability and his recommendations for marketing future carbon pricing policies are thoughtful. He advocates for persistently reminding voters that a carbon tax is a tax shift: more revenue from the carbon tax can mean lower tax rates and increased direct rebates to households. I’ll raise a minor objection here: in BC, this is currently only partly true. While the carbon tax does return more to the average lower-income household than it takes away, recent revenue increases have not led directly to additional reductions in income or corporate tax rates. Returning to genuine revenue neutrality would help defend the tax as critics press forward. Still, BC’s carbon tax remains as close as anyone has come to the textbook version of a carbon pricing system and will be essential in helping Canada meet its ambitious emissions reductions targets.

If the tax survives that long, that is. The NDP’s recent reversal of support for the BC carbon tax suggests a lack of faith in their ability to defend the tax politically against its critics. If repealed, it will be a loss for BC, for Canada, and for the world. The Carbon Tax Question allows us to reflect on the long history of fights over carbon pricing in our province and to hope that, once again, it will defy the axe-bearers.