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Abstract: In 2008, British Columbia became one of the few jurisdictions in the world to successfully implement a comprehensive carbon tax. The architect of the tax, Premier Gordon Campbell, championed the broad-based carbon tax that applied to nearly all fossil fuels and made it “revenue neutral.” Every dollar raised from the tax would be returned to BC residents and businesses in the form of personal income and corporate tax cuts.
Campbell was an unlikely proponent of the carbon tax. As the leader of the traditionally conservative BC Liberal Party, he had cut taxes in the past, but now he had reason to believe a revenue neutral carbon tax could be a winner for both the environment and the economy. But with elections just months away and growing public distrust of the tax, combined with a noisy campaign against the tax mounted by the opposition New Democratic Party, the tax’s fate, and that of Campbell’s political career was far from certain.
This case provides an insider’s account of how the carbon tax was designed, with the strong role Premier Gordon Campbell played in its creation. It also explores political and other challenges the government faced when designing and implementing the tax.
Learning Objective: Most economists agree that a carbon tax is the most efficient and economical way to reduce carbon emissions. Yet, very few jurisdictions have managed to implement one. By closely analyzing how British Columbia was able to introduce and sustain an effective carbon tax, students will gain knowledge of how both politics and economics can play a vital role in policymaking on climate change. Students weigh the pros and cons of carbon taxes as well as other approaches to mitigate climate change such as cap and trade or regulation to gain a deeper understanding of the tradeoffs involved with each. And finally, students examine the various elements of the BC carbon tax from its revenue neutrality to its broad-based coverage, and learn about how each such element might impact political acceptability in the short term, and economic growth in the long term.
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Joseph B. Tompkins, Jr. Fund for Case Study and Research