05/01/2013 07:34 EDT | Updated 07/01/2013 05:12 EDT

BC Carbon Tax Expected To Survive Election, Conservatives Unhappy

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Gold River, British Columbia, Canada

VANCOUVER - As pundits and pollsters attempt to predict the results of British Columbia's forthcoming election, there is at least one sure bet: the province's carbon tax will survive the May 14 vote.

It was quite a different picture leading up to the previous election, in 2009, when the Opposition New Democrats were mounting a populist "Axe the Tax" campaign they hoped would propel them to power.

The strategy didn't work, and in the intervening four years, the NDP have undergone a complete conversion, not only vowing to keep the carbon tax but also expand it and change what happens to the money it raises. The governing Liberals, for their part, would keep the tax without any increases or changes.

Despite the agreement among the main two parties, the once-despised tax is still factoring into the B.C. election campaign, with the province's fledging Conservatives effectively picking up where the NDP left off last time.

Conservative Leader John Cummins is attempting to bolster his appeal among the province's rural and northern residents, typically viewed as right-of-centre Liberal party voters, by declaring the carbon tax a failure and calling for its elimination.

"As it stands now, it's a disincentive to business, it's hurtful to families because they have to pay that additional tariff every time they fill up the family car, and the guy that has to commute to work and hasn't got an option for public transit — he's got to pay the carbon tax," Cummins said in an interview.

"The Liberals felt they were leading the way and the rest of the continent was going to follow. Well, they haven't."

Cummins' arguments against the carbon tax echo the New Democrats' 2009 campaign talking points almost exactly. The tax isn't effective. It hurts the economy. It's unfair to the public, particularly residents living in rural areas and the province's north.

But both the provincial government and experts who have studied the tax argue it has been effective in reducing greenhouse gas emissions, especially when compared with other provinces, while having little negative effect on the economy.

"I think B.C. basically adopted the most cost-effective model for reducing greenhouse gas emissions," said Nicholas Rivers, a professor at the University of Ottawa who holds the Canada Research Chair in climate and energy policy.

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The tax was introduced in 2008 under then-premier Gordon Campbell.

It began at a rate of $10 per tonne of carbon dioxide emissions, gradually increasing until it reached $30 per tonne in July of last year. For the average consumer, the tax means an extra 6.67 cents for each litre of gasoline and an additional 5.7 cents for cubic metre of natural gas. Industrial energy sources, such as jet fuel and coal, are also covered by the tax.

The government claims the tax is revenue neutral, pointing to other tax breaks, including for low-income and northern residents that it says offsets any money raised through the tax.

The Liberals announced a review of the tax last year, and concluded in their most recent budget that the tax should not be increased at least until other jurisdictions implement carbon taxes of their own.

The NDP's platform would expand the tax to include venting emissions from oil and gas production, while using some of the tax money to fund transit programs and other climate-related programs, rather than keeping it strictly revenue neutral.

The government released a report last year that concluded greenhouse gas emissions in the province had decreased by 4.5 per cent between 2007 and 2010, the most recent emissions data available. The report also noted GDP growth in B.C. outpaced the national average in the same period, suggesting the tax wasn't having the catastrophic effect some critics predicted.

The limited data available about the impact of the tax makes it difficult to be certain whether it's working, but Rivers said the few studies that have been conducted suggest it is effective.

Rivers released a study last year that examined gasoline sales in B.C. and elsewhere before and after the tax's implementation. Rivers said the research indicated increases in the carbon tax decreased gasoline demand by about five per cent.

He said that decrease is larger and to a greater degree than other price increases, such as a temporary spike due to a refinery shutdown.

The paper concluded the carbon tax decreased gasoline consumption by between five and 10 per cent — and, consequently, decreased emissions by the same amount.

Rivers is about to release a second study examining the effect on the agriculture industry. He and his colleague examined whether B.C. is importing more agricultural products and exporting less, which would indicate the province had become less competitive.

"We couldn't find any evidence of this competitive disadvantage," said Rivers, who worked on the two research projects with University of Ottawa colleague Brandon Schaufele.

"In other words, it doesn't look like the pattern of imports and exports of agricultural products changed in B.C. as a result of the carbon tax."

Another report prepared by Sustainable Prosperity, an Ottawa-based think tank, concluded fossil fuel use in B.C. dropped by about 15 per cent in the first four years of the carbon tax regime, compared to a 1.3 per cent increase in the rest of Canada. The report also notes B.C.'s GDP growth was slightly higher than the national average.

And the province argued when the tax was introduced that rural residents wouldn't be affected as much as they feared. The government introduced specific tax breaks for northern residents, while also noting that commuting times are actually far shorter in rural B.C. compared to the greater Vancouver area.

For opponents of the tax, such studies and statistics are cold comfort as they see their gasoline and energy bills increase. While the B.C. Conservatives insist the tax isn't working, their main political point is largely centered around fairness.

In Fort Nelson, a small community located roughly 1,600 kilometres northeast of Vancouver, opposition was angry and loud when the carbon tax was first introduced.

Five years later, the community's mayor, Bill Streeper, said the issue has largely died down. People have just become used to it, he said.

"I think if you look at it right now, if the status quo remains, it is livable," Streeper said in an interview.

"It has not been a subject that has been brought up in my area for at least two years."

However, the results of this month's election could change that if the New Democrats win and tax emissions from natural gas production, as the party's platform promises, warned Streeper. The region's economy is heavily dependent on the natural gas industry.

"If the industry was doing absolutely nothing, I wouldn't be as supportive of the industry, but there is a lot of money being spent right now on the question of (carbon dioxide)," he said.

"People will accept the tax that's there now if we can get shipping our gas. We can live with that, just let us get this gas shipped to market."

Jock Finlayson of the B.C. Business Council said he's skeptical of the impact the tax has had.

Finlayson, whose group wants to see the tax reduced, said he believes the current carbon tax rates are too low to prompt meaningful change, but high enough to hurt businesses.

When asked what evidence he has that shows the tax hasn't reduced emissions, Finlayson suggested it's a matter of degree.

"I'm not saying it's had no impact, but it's a real stretch to believe that a tax that's put four or five or six cents onto the cost of gasoline at the pumps has dramatically reduced the amount of fossil fuel consumption from households," Finlayson said in an interview.

On the other hand, Finlayson argued the tax puts businesses in B.C. at a competitive disadvantage because they pay the tax and their counterparts elsewhere do not.

"It raises the cost of production for anybody who's using energy," he said.

"It makes very little sense for one small jurisdiction that is highly interdependent on our neighbouring provinces and states to go down this road if others don't follow. We've been sort of dancing alone."