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| 02/21/18

BC budget unveils support for industry to prevent ‘carbon leakage’


British Columbia’s 2018 budget, the first full budget of the New Democrat administration elected last May, has unveiled changes in climate policy and committed to associated new spending to support the clean transition for industry.

Due to the additional costs of the carbon tax, emissions-intensive industry in the province is at risk of being undercut by competitors outside the province not beholden to such a tax—a phenomenon known as “carbon leakage,” as the movement of production to jurisdictions without the tax would not result in lower global emissions overall, but just shift emissions to another region.

To prevent carbon leakage, the government is to create a new incentive program for these large industrial emitters. A performance benchmark will be established based on the lowest emitting facility in that sector operating anywhere in the world. An industrial incentive worth up to 100 percent of the carbon tax they pay beyond $30 per tonne will be paid out, depending on how well their greenhouse gas intensity compares to the benchmark.

A second approach under the clean growth incentive program will encourage such emitters to apply for investment support to transition to clean technology alternatives. The budget for this, along with a new industrial emissions reporting and auditing framework, will be announced in 2019.

Funding for both approaches will come from the province’s carbon tax, set to increase by $5 per tonne this year.

As had been announced in September’s 2017 budget update, the government overturned the previous Liberal administration’s commitment to a revenue-neutral carbon tax, first introduced in 2008. The Green Party-supported NDP minority government had said at the time that it would use some of the revenues from the tax to hike the tax rebate for low-income households and spend on clean transition initiatives. The rebate has now been confirmed, with the government providing an additional $40 million in total to low- and moderate-income citizens.

As part of a wider effort to extend the life of social housing, the government is to fund retrofits and renovations that aim to reduce heat losses, thus reducing energy consumption and carbon emissions. Homes at the bottom end of the market, with their frequently poor insulation, are some of the least energy-efficient buildings.

The government has also committed an additional $50 million for community wildfire resilience and $22 million for recovery from the 2017 wildfires. A “forecast allowance” (basically budgetary wiggle room) of $350 million in 2018-19 rising to $600 million in 2020-21, was also included specifically to guard against unanticipated revenue volatility from additional costs to fight wildfires or floods. The third quarter fiscal outlook for 2017-18 is not as optimistic as had earlier been projected largely due to spending on wildfire, down almost $40 million. Total government spending is now also forecast to be lower than had been expected due to a number of unforeseen expenses, the largest of which was emergency measures related to the wildfires.

In depth

Exploring Climate Policy Options: A Conversation with Mark Jaccard

Energy economist Mark Jaccard helped design BC’s carbon tax, and he still supports it. But he questions just how politically viable a stringent tax—at the level needed to meet climate targets—can really be. So he also continues to explore how other policies that the public find more acceptable could work.

Climate news and analysis that's relevant for you, every week.