Assessing the impact of the carbon tax on business costs in various industries in British Columbia

Industries that have a high usage of petroleum products will generally experience a slightly higher cost increase due to their higher usage

By Ven Venkatachalam and Lennie Kaplan

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Since introducing a carbon tax in 2008, the Province of British Columbia (BC) has attracted significant attention from policymakers due to its large natural resource sector. Energy products account for 38 percent of all provincial exports, with coal and natural gas accounting for 31.5 percent of those exports.

The carbon tax is a policy instrument governments have implemented with the aim of curbing greenhouse gas emissions (GHGs). However, businesses and others have raised concern about the impact of the carbon tax on industry costs and competitiveness. The carbon tax makes producers pay for their emissions. The problem arises when there is no uniform carbon policy across international markets.

The carbon tax affects nearly all taxpayers in BC regardless of who bears the initial cost. As such, businesses in the province need to know about the carbon tax and its impact. This CEC Fact Sheet looks at the potential impact of a federally mandated $170 per tonne carbon tax in 2030 on various industries in the province.1

Our analysis provides a general overview of the potential impact of the carbon tax on production costs for particular sectors because each business organization is unique. Businesses need to complete their own analyses specific to their own business models and based on their suppliers, competitors, customers, and markets. Studies conducted with different methodologies and assumptions will calculate different estimates of the impact of the carbon tax on business.

Carbon tax legislation and business costs

As part of the 2016 Pan-Canadian Framework on Clean Growth and Climate Change, the Government of Canada passed the Greenhouse Gas Pollution Pricing Act (GGPPA) in December 2018. The GGPPA imposes a carbon pricing system on provinces and territories that either have not implemented their own carbon pricing system or have implemented a system that does not meet the minimum requirements set by the federal government.

Federal and provincial governments both have the constitutional authority to regulate climate change policy, which affects how policy has been developed in BC.2

Under the GGPPA, the federal carbon tax began at $20/tonne in 2019 and escalated by $10/tonne per year to $50/tonne in 2022. In December 2020, the federal government released an updated plan with a $15/tonne per year increase in the carbon price to reach $95/tonne in 2025 and $170/tonne in 2030.

1. In this Fact Sheet, we use customized data from Stokes Economics to examine the impact of the carbon tax on industry production costs. The CEC retained Stokes Economics to 
estimate the additional costs industries will incur from the carbon tax. The estimated impact on industry costs from carbon taxes presented in this analysis focuses solely on pricing fuel 
emissions subject to the provincial carbon tax.