BC Carbon Tax - it is NOT “Gas” Tax

The combustion of any of the following fuel has Carbon Tax associated with it.  Each fuel and its associated carbon tax for 2008  is outlined below:

• gasoline - 2.34 cents/L;
• diesel - 2.69 cents/L;
• natural gas - 49.66 cents/GJ; 
• jet fuel - 2.61 cents/L;
• propane - 1.54 cents/L; and 
• coal - HHV 20.77 $/tonne or LHV 17.77$/tonne. 

Depending on the type of fuel, different amount of Greenhouse Gases (GHGs) is produced during combustion.  In the “Climate Change Terminology”, different fuels have different emission factors (i.e. x  gCO2e/L gasoline and y gCO2e/GJ Natural Gas).  In Canada, Environment Canada determines emission factors and they are documented in the “National Inventory Report, Greenhouse Gas Sources and Sinks”.  You may have noticed that the emission has the unit of “CO2e”, which stands for “CO2 equivalent”.  This is because GHGs is more than just CO2, other  GHGs (water vapor, methane, nitrous oxide, ozone, and CFCs) can also form during combustion of fuels. CO2e takes account of all GHGs.    

Since we know that each tonne of CO2e will be taxed at $10 in 2008, we can determine the actual Tax that one needs to pay, which has been listed above.   

OK, enough of boring definition, my point is that the Carbon Tax is not just the gas tax!  In fact, as outlined in the BC Climate Action Plan (P.25-26):

• only 36%of GHG emissions in BC is from transportation (i.e. the combination of gasoline and diesel), AND 
• only 39% of the transportation emission is from passenger vehicles! 

 This means that only 14% of the Carbon Tax is from the combination of gasoline and diesel!  

In other words, 86% of the Carbon Tax is not from purchasing gas or diesel at the pump!  Not bad in my opinion, what do you think?

2 Comments

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  By Aldyen Donnelly, April 18, 2009 @ 11:36 am

  You are right to say that not all of the BC carbon tax is a gas tax. But your calculations are incorrect.

  In the last 6 months of 2008 the BC government collected $300 million in carbon tax revenues ($38 million less than budgeted). (http://www.bcbudget.gov.bc.ca/2009/bfp/2009_Budget_Fiscal_Plan.pdf).

  We can multiply Statistics Canada’s freely available estimates of Jul - Dec 2008 gasoline and diesel sales by the carbon tax rates to learn that BC collected about $55 million in carbon taxes on gasoline and $26 million in carbon taxes on diesel fuel, which combine to suggest that consumers of these fuels made up 27% of 2008 carbon tax revenues. Households (gasoline) APPEAR to have remitted about $2 in new carbon taxes for every $1 commercial fuel consumers (diesel) remitted. And that was after BC gasoline sales fell 2.2% between 2007 and 2008, while diesel sales jumped up 8.9%.

  Carbon tax revenues collected from consumers of transportation fuels fell well short of the original budget forecast–in my view because the forecast did not make any sense. Carbon tax revenues collected on home heating bills (natural gas and propane) significantly exceeded the original budget forecast (largely because it was a cold winter), while carbon taxes collected from industrial fossil fuel consumers fell more than $80 million short of the original budget forecast.

  What is most interesting is that Statistics Canada reports that between Nov 2008 and the end of March 2009, Vancouver retail (all taxes included) prices for diesel fuel fell from 104.4 centre per litre to 81.40 cents per litre, while retail prices for premium unleaded gasoline increased from 109.4 to 112.1/litre. So the oil companies have shifted wholesale prices to effectively remove the entire retail price impact of the carbon tax burden from the diesel fleet to the gasoline fleet–in other words, from the market segment that has demonstrated demand growth since 1998 to the segment that was already slowing shrinking before the tax was introduced.

  It also means that households essentially paid 100% of the carbon tax collected on both gasoline and diesel, and commercial fuel customers remained largely untouched by the new tax. Using wholesale price adjustments to move the tax burden from where government first puts it to someplace else is how the private sector maximizes profits.

  This retail price behaviour is consistent with what we have seen in every CO2 taxing nation since 1991–in that there is little to no correlation between the distribution of the retail price increases and the government’s actual distribution of the tax. This is one of a number of reasons consumption taxes are highly inefficient market behaviour modification mechanisms in real life, even though they appear efficient in theory.

  The only way to make an energy consumption tax actually work the way governments want it to is to add price control regulations to the tax measure. Hopefully we have learned the pitfalls of price controls and won’t be going there. But for the theory that carbon taxes will change behaviour to play out in real life, governments always have to follow up with price controls.
  That BC gasoline consumption only fell 2.2% in 2008 is actually surprising, given the onslaught of the economic recession and the well-established pre-2008 trend of limited demand growth (between 2000 and 2008 gasoline demand in BC grew, on average, 0.4% per year, with population growth well over 2.0% per year).

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  By flo, April 19, 2009 @ 11:19 pm

  Hello Aldyen - thanks for your comment, i will check the numbers and get back to you. You brought some real interesting figures, you are right that i didn’t really do the calculation myself….. thanks again!

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