The British Columbia Carbon Tax: A Failed Experiment in Market-Based Solutions to Climate Change

Our planet’s climate crisis is intensifying, but many in industry, government and even the advocacy community have turned to market mechanisms to alleviate climate change instead of regulating the pollutants that cause it. These free-market approaches rely on putting a “price” on climate change-inducing emissions — such as imposing taxes on carbon — as an indirect method to reduce these pollutants.

The Canadian province of British Columbia implemented a carbon tax on certain fossil fuels in July of 2008. Some experts and pricing proponents are using the British Columbia carbon tax example to promote carbon taxes and other market mechanisms as a way to purportedly reduce greenhouse gas emissions and address our climate problem. Unfortunately for these free-market proponents, the real-world record fails to demonstrate that British Columbia’s carbon tax reduced carbon emissions, fossil fuel consumption or vehicle travel. Most of the modest and short-term reductions in emissions seem to be related primarily to the 2008 global recession, not to the carbon tax. More recently, British Columbia’s emissions have resumed their rise.

This report examines the British Columbia program and finds that this type of pricing approach is not going to save the planet or safeguard our communities. A more straightforward approach of regulating emissions would be significantly more effective at curbing climate change.

Key Findings

  • During the years that the tax was in place for the entire year, from 2009 to 2014, greenhouse gas emissions from taxed sources rose by a total of 4.3 percent. During this same time period, emissions from non-taxed sources fell by a total of 2.1 percent. 

  • The one-time drop in emissions from 2008 to 2009 does not appear to be driven by the carbon tax. The average annual year-to-year change in taxed greenhouse gas emissions barely changed after the carbon tax went into effect. 
  • According to the most recent data released by the province, from 2011 to 2014, the total taxed greenhouse gas emissions rose by 5.3 percent. Meanwhile, total untaxed emissions decreased by 2.5 percent, and the annual average growth for taxed emissions rose by 1.7 percent annually and exceeded untaxed emissions. 
  • Canada projects that British Columbia’s total greenhouse gas emissions will increase over coming years even with the tax in place.

This data from British Columbia, which shows the carbon tax has failed the reduce carbon emissions in the ten years since it was implemented, gives little reason to believe a carbon tax would curb emissions in the U.S. or elsewhere. Meanwhile the oil and gas industry is throwing its support behind carbon taxes, rather than strong regulations to limit emissions, arguing that market solutions are the best way to address climate change.

Read the report for the full findings on British Columbia’s failed market-based solution to carbon emissions.

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On Sept 19, 2023 ahead of the Climate Ambition Summit in New York City, climate activists gathered for a rally and civil disobedience outside Bank of America Tower in Midtown Manhattan as part of the March to End Fossil Fuels wave of actions resulting in multiple arrests. Activists demand Bank of America to “Defund Climate Chaos and Defend Human Rights” Photo: Erik McGregor (CC BY-NC 2.0 Deed)

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Illustration by Stephanie McMillan. Used with permission