Carbon taxes arrive in Canada

Corpobligation: While the carbon tax initiatives of the Quebec and British Columbia (BC) government are modest, they show the potential of tax shifting to discourage bad things (polluting/destructive) and encourage good things (innovation, sustainability). Carbon taxes (may) promote better CSR and environmental practices.

• Apply to virtually all fossil fuels, including gasoline, diesel, natural gas, coal, propane, and home heating fuel, making it among the broadest and most comprehensive in the world.
• Initial rate based on $10 per tonne of associated carbon, or carbon-equivalent, emissions and will rise by $5 a year for the next four years — reaching $30 per tonne by 2012.
• Carbon tax will be revenue neutral as a result of tax cuts and allowances to aid in adaptation.
• The proposed carbon tax is mostly for show, if we rely on narrow neoliberal economics (read more below).
  

Quebec's carbon tax :

• October 2007 - 200 million dollars a year, 1.2 billion dollars over 6 years, to support projects that will allow us to reduce greenhouse gas emissions.
• According to the CBC, The tax will amount to 0.8 cents on every litre of gas sold in Quebec, and 0.9 cents on each litre of diesel fuel.
  
• Oil companies will be hardest hit. They will pay about $69 million a year for gasoline, $36 million for diesel fuel, and $43 million for heating oil.

The proposed B.C. carbon tax is below the cost of many businesses' marginal cost of reducing emissions; therefore, their corporate social responsibility measures will not exceed the efficiency measures that they would take without the carbon tax. To illustrate, if we assume that businesses are profit maximizers, then they will take measures to reduce their emissions as long as this saves them money. We could call these measures "rational management choices" or common sense business choices; the basic GHGs that a corporation emits. But if the marginal (or extra) cost of a new efficiency measures is greater than the value of the tax, then they will not take the step.

For example, if new scrubbers on a factory would cost $20 per ton of emissions, then a company would adopt the measure in 2010 when the carbon tax would be $20 / ton. However, if the scrubbers cost $50 / ton, then a company would not install the scrubbers because the tax is lower than the cost of installation.

However, if we look beyond this neoliberal economic approach to corporate decision making around CSR concerns (about corporate image, access to government contracts, public pressure, consumer concerns etc), the taxes may may lead to changes. Even if the cost savings of the new technology are not apparent on a narrow accounting basis, a company may take action to avoid bad publicity / get good publicity and accumulate "goodwill".

This is really the main benefit of the carbon taxes proposed by the BC government: public awareness combined with government action may lead to momentum towards better CSR practices, which may lead to better corporbligation! 

Learn lots more about carbon taxes at the Carbon Tax Center

Read more about GHGs at corpobligation.com

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