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North America gets its first carbon tax

The Canadian province of British Columbia hopes to change consumer behavior – and raise revenue – by taxing virtually all fossil fuels, including gasoline and home-heating fuel.

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Taxing carbon-spewing machines to slow global warming certainly has an eat-your-peas aspect to it: "Trade your SUV for a hybrid or we'll make you pay!"

Then again, tax policy can have a huge and positive impact on individual and group behavior. In part, high cigarette taxes explain why rates of smoking among Americans have plummeted.

The Canadian province of British Columbia last week became the first jurisdiction in North America to enact a consumer-based tax on carbon emissions. The Vancouver Sun reported:

"The move was seen as a huge win by environmentalists, who depicted B.C. as a leader in taking action on climate change. 'I think this is a landmark decision in North America as far as government addressing global warming,' said Ian Bruce of the Suzuki Foundation. 'The B.C. government has decided to use one of the most powerful incentives at its disposal to reduce pollution,' he added...."

The goal is to raise US$1.75 billion over the next three years by taxing virtually all fossil fuels, including gasoline, diesel, natural gas, coal, propane, and home-heating fuel. It starts in July at $10 per ton of carbon emissions, rising to $30 per ton by 2012. Consumers will pay an extra 2.4 cents a liter (9 cents per US gallon) this year for gasoline, rising to 7.2 cents by 2012. Home heating oil would rise 2.8 cents a liter (10.6 cents per US gallon), going up to 8.3 cents per liter over the same period. The Globe and Mail (subscription required) reported:

"'It has been a dramatic turn, I think, for this province with this budget to say we're not just going to be talking about climate action,' said Finance Minister Carole Taylor. She said the strategy is to 'tax something that we know is bad for us,' and use the revenue to stimulate wide social change by providing incentives for people and businesses to become more energy efficient."

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