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The Progressive Economics Forum

Timing is Everything

More than anything else, BC’s carbon tax is the victim of bad timing. Here’s the average gas price in Vancouver over the past year, according to the BC Gas Buddy:

Note that the BC Budget, which announced the carbon tax, was tabled on February 19, and the tax was implemented on July 1. In that time, prices at the pump went nothing but up. On or about Feb. 19 (by my eye), gas prices were about $1.11 per litre. By July 1, they peaked at mover $1.50 per litre (the carbon tax pushed it over the top, although it counted for a mere 2.34 cents per litre of the increase of almost 40 cents).

This backdrop of rising prices has arguably done way more than the carbon tax in terms of changing people’s behaviour. It has also led to massive windfall profits for oil companies. And yet the carbon tax has borne most of the brunt of public anger, even though all of it is recycled back through tax cuts (which were mostly a waste in my opinion) and a low-income credit (which more than compensates low- to modest-income folks for the the tax, on average anyway).

For the conspiratorially inclined, there is a great one to be written here of a cartel of oil companies savaging a carbon tax. Not me, though, I’m just pointing out the numbers.

Here’s the six-year trend in gas prices:

Going back to 2003, prices roughly doubled from then to the recent peak in early July. People have responded by changing their behaviour, but relative to that kind of increase, comparably little. Still, one gets the sense that public sentiment has turned the corner and a new rule-of-thumb has settled in that anticipates continued, even increasing, energy prices moving forward.

This is a good thing. Higher prices will make people change their behaviour moreso over time. But all of the concern over regressive impacts of a carbon tax need to be ported over to profit-taking on the part of oil companies. And I have yet to see any political leader knock this one out of the park in this election cycle.

Enjoy and share:


Comment from Stuart Murray
Time: September 30, 2008, 9:52 am

Wot, a provincial government getting blamed by the opposition for causing problems that are entirely due to market forces? And the public buys it hook, line and sinker? I wonder who invented this brilliant political strategy? What goes around comes around.

My only question is, if the NDP gets elected are they going to pad every government-appointed board with executives from the oil industry as a payoff for all their great work?

Comment from Leigh Thomson
Time: September 30, 2008, 1:10 pm

The market loves market-based solutions, because today the market can play a number of angles to make the costing of externalities useless as a policy tool.

Until we get some real market controls in place we should stick to hard caps if we want to reduce emissions.

Comment from Kim Feraday
Time: September 30, 2008, 4:03 pm

Could you tell us where they targetted the tax cuts. Also how would you compare the B.C. tax cuts relative to those being proposed by the Greens and Liberals.


Comment from Leigh Thomson
Time: September 30, 2008, 7:59 pm

Kim, I think you’re confusing the various carbon taxes, existing and proposed, with the entirely different discussion around taxing corporate profits. But you are not alone in your confusion!

Aside from reviewing the carbon pricing discussion, tagged in the column to the left here, you might want to go to the web sites of each party, and the BC gov’t, and read up on their tax programs, in the context of the rest of that party’s/gov’ts program. These things need to be taken in larger context, including your own sense of inequities.

best wishes,

Comment from Rod Smelser
Time: October 30, 2008, 9:39 am

My only question is, if the NDP gets elected are they going to pad every government-appointed board with executives from the oil industry as a payoff for all their great work?

An puzzling question, Stuart, I don’t know what you have in mind. Jack Layton, in response to questions at a BBQ last summer, stated that the NDP had looked at carbon taxes and decided that cap and trade was better. He stated that carbon taxes were prefered by “right wing economists” and by the oil companies.

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