End of consumer carbon tax means cheaper gas but leaves $1.5B hole in B.C. budget: business prof

British Columbia's budget shows that the impending end of the province's consumer carbon tax will leave a roughly $1.5-billion hole in its revenue streams, with one expert saying "there will be both winners and losers" from the change.

The budget released earlier this month shows the province was forecasting revenue of just over $2.5 billion from the tax in the 2024-25 fiscal year, while the estimated cost of the climate action tax credit was $995 million.

Werner Antweiler, associate professor at the Sauder School of Business at the University of British Columbia, said that leaves about $1.5 billion in revenue the province will need to make up, which could include cutting spending or raising taxes elsewhere.

Antweiler said the end of the consumer carbon tax will bring relief for drivers at the gas station — as much as about 17 cents per litre.

However, he said the climate action tax credit targets low-income households, and those who have seen a significant benefit may lose out.

WATCH | How will the end of the consumer carbon tax impact individuals? 

What does the cancellation of the carbon tax mean for your wallet?

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British Columbians will soon have to pay less when they fill up their gas tanks. The province and the federal government are cancelling the consumer carbon tax, effective April 1. But with the disappearance of the associated tax credit, will the cancellation put money back into British Columbian's pockets?

People in lower-income households tend to drive less, especially in urban areas with transit systems, while wealthier people tend to drive more, Antweiler noted.

That means some who had been receiving the climate action tax credit won't see equal savings at the pump once the carbon tax is scrapped, he said.

It's also not clear how organizations that received money from the tax — including TransLink and B.C. Transit — will make up for the shortfalls.

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Statistics Canada has revealed inflation accelerated to 2.6 per cent across Canada following the federal tax break. Meanwhile, the federal government is scrapping the consumer carbon tax and the province is hiking B.C. Hydro rates. We ask viewers about their cost of living situations as Concordia University professor Moshe Lander joins the show to provide context.

B.C. looking to make up shortfall

The B.C. carbon price has been in place since 2008, when the province became the first jurisdiction in North America to impose such a levy.

The first phase of the system was designed to be revenue neutral, returning the costs in the form of corporate and personal tax cuts, Antweiler said. 

As the price of carbon rose, he said the B.C. government took a "double dividend" approach by using some of the revenue to fund climate action initiatives while returning some of it to consumers with a climate action tax credit.

The province now faces a "significant shortfall," he said.

WATCH | Climate solutions minister Adrian Dix says politics has undermined carbon tax's value: 

B.C. will do away with provincial consumer carbon tax, energy minister says

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Duration 11:04

Energy and Climate Solutions Minister Adrian Dix said his government will follow through on a pledge to eliminate B.C.’s own consumer carbon tax in response to U.S. tariffs, among other measures.

Premier David Eby has said work was underway in the Finance Ministry to make sure B.C. is "able to accommodate this commitment within the budget."

He made the comment when announcing on Friday that his government would follow through on its promise to repeal the consumer carbon tax after Prime Minister Mark Carney moved to eliminate the federal version of the levy.

Energy Minister Adrian Dix was also asked how the province plans to replace the lost revenue at an unrelated news conference on Monday.

He said legislation would be introduced before the end of the fiscal year on March 31, and the finance minister would provide further details.

Dix said the tax had been effective but that it had been politicized beyond the point of usefulness.

"The debate about climate change has become a debate about the carbon tax," he said in an interview with CBC's The Early Edition. "[It's] undermined the overall effort to address climate change."

Eby said cost-of-living pressures and the pending removal of federal carbon pricing for consumers showed there was no longer support for the levy.

Still, he said B.C. would ensure "big polluters continue to pay" for their emissions as the province retains its carbon pricing system for large industrial emitters.

"Not because we want them to have to be taxed, but to encourage them instead to adopt the technologies that reduce emissions," the premier said.

WATCH | How will Canada tackle emissions as the consumer carbon tax is lifted?: 

What's next for climate action with consumer carbon tax ending?

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Canada's new prime minister and B.C.'s premier are both vowing to put an end to the consumer tax on carbon. It has been a divisive issue, but experts say it's also been a key measure in the country's fight against climate change. Liam Britten reports.

The Opposition B.C. Conservatives have previously voiced concern that Eby's government would scrap the consumer carbon price, then boost charges on businesses, which would still affect consumers in the end.

The B.C. Greens issued a statement last week saying the decision to end the tax and associated rebate "leaves many questions unanswered," including how the government will make up the revenue.

The Greens have long called for adjustments to carbon pricing "to make it more fair, so that big industrial polluters pay the same per tonne of carbon as everyday British Columbians. Now is the time to fix that imbalance, not abandon climate action altogether," the statement from Interim Green Leader Jeremy Valeriote said.