On 1st July 2008. British Columbia introduced a revenue neutral carbon tax in order to encourage individuals and businesses to reduyce fossil fuels and related emissions.
The rate starts at CAN$10 (€7.50) per tonne of carbon equivalent, rising by CAN$5 per annum for the next four years to finally reach CAN$30 (€22.50) per tonne.
It is based on the following principles (BC Ministry of Finance, 2010):
It is broad-based, i.e., it applies to virtually all fossil fuels.
It was phased in to give residents and industry time to reduce the impact.
To protect lower-income households, they receive an annual Climate Action Credit of CAN$100 (€75) per adult and CAN$30 per child.
The tax is revenue neutral. The legislation requires a plan showing how the revenue is returned to individuals and businesses through the reduction in other taxes, with none to be used for expenditure programmes.
The carbon tax is projected to make CAN$1,849 (€1,380) million over three years and the revenue is returned as follows (IBID.)
The bottom personal income tax rates are reduced for all residents, by 2 per cent in 2008 and 5 per cent in 2009 on the first CAN$70,000 in earnings. Futher reductions are planned for 2010.
The general corporate income tax rate wasl be reduced to 11 per cent from 12 per cent, with reductions down to 10 per cent planned.
The small business tax rate was reduced to 3.5 per cent from 4.5 per cent with reductions to 2.5 per cent planned.
The Climate Action Credit is to increase annually.
BC Ministry of Finance, 2010. B.C.'s Revenue-neutral Carbon Tax. http://www.bcbudget.gov.bc.ca/2008/backgrounders/backgrounder_carbon_tax.htm