Carbon tax revenue and costs didn’t balance

So the Ministry of Finance recently released facts on the carbon tax: it pulled in $306 million, vs. a projected $338 million.

My understanding of this is that the projections were based on either current carbon consumption or consumption based on past increases. That said, these projections were not based on the assumption that the carbon tax would lower consumption by a certain percent.

The reasoning for this is pretty clear. If I’m basing projected income, I base it on expected consumption. I should expect that consumption is going to increase (in the case of a carbon tax, a growing population would be cause for such an increase). I would base this projected increase on past results; ie if income picked up 10% last year, I should expect that increase to fall around 10% this year, barring any unexpected shortfalls (such as a recession).

So, if the government spends more money on the carbon tax than they take in, what can we take that to mean? Obviously, if the carbon tax charges $10 ($15 now, but $10 from July 08-09) per tonne of emissions and the income is less than government predictions, then less carbon was consumed than the government expected.

Despite predictions from various naysayers, the carbon tax is not a money grab. Were it a money grab, it would have been the other way around – we would have paid more and given less.

As it stands, while this was a bit of a hiccup, it is definitely good news that not only did BC record a record surplus, but carbon consumption was actually lower than expected.

There is of course a bit of a glitch, and that would be that natural gas revenues increased to $70 million . But that isn’t too hard to understand.

The Ministry of Finance lists the tax on Natural Gas as being 2.85 cents per cubic metre. This number is based on the carbon pricing as being $15 per tonne of carbon dioxide (this 2009 numbers — 2008 numbers would be 1.89 cents per cubic metre, or $10 per tonne of carbon dioxide). Natural gas is cheaper to burn than most other fuels because it is better for the environment.

The end result of all of this?

Revenues for one of the cheapest fuels for heating increased despite a recession, and emissions were lower than expected. Of that extra $32 million, business received $11.52 million of the benefits, while individuals received $20.48 million of the benefits.

Tax grab? Evidence would suggest otherwise.

Explore posts in the same categories: Carbon Tax, Global Warming

Tags: $306 million, $32 million, $338 million, 1.9, 2.4, 2.85, 3.6, 78 million, axe-the-tax, Barry Penner, BC, budget, Carbon Tax, cheaper to burn, Climate Action, climate action dividend, Deficit, disparity, expectations, gas tax, gasoline, John Yap, lower, Ministry of the Environment, natural gas, Surplus, the tyee, Tieleman

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