The following op-ed, by ICBA Chief Economist Jock Finlayson and BC Macro Brief author Ken Peacock, first appeared in Business in Vancouver on April 17, 2025.
“Oh what a tangled web we weave, when we first practice to deceive.” The words from Sir Walter Scott’s poem Marmion seem apt as the NDP jettisons the consumer-facing provincial carbon tax and distances itself from other elements of its CleanBC Plan which aims to dramatically slash greenhouse gas (GHG) emissions by 2030.
The good news is that killing the carbon tax will save consumers and businesses upwards of $1.5 billion per year, improve the competitiveness of many B.C. exporters, and provide a dollop of fiscal stimulus. But the abrupt policy volte-face also brings several complications for the government.
The threads of B.C.’s climate policy web were first spun in 2017, when the NDP eliminated the revenue-neutral structure of the carbon tax established by the previous administration. Instead of trimming personal and corporate income taxes as the carbon tax steadily increased (thus keeping the overall tax burden stable), the NDP incorporated the additional tax revenue into its operating budget. In 2025-26, the province planned to collect $3 billion in carbon tax revenue—a sizable jump from the $1.2 billion raised back in 2016-17.
Most of that revenue is now set to disappear. Large industrial emitters will still pay a carbon levy on their emissions, via a different taxing mechanism. This is expected to generate $200 million annually, meaning the government is looking at a $2.8 billion revenue loss compared to the projections in Budget 2024.
Some of the revenue loss will be offset because the government intends to stop dispensing Climate Action Rebates to households, saving $1.2 billion this fiscal year. For the Ministry of Finance, grappling with a string of massive deficits and another debt downgrade, the smaller net $1.6 billion revenue shortfall is no doubt welcome. But eliminating the carbon tax awkwardly means households in the bottom 40 per cent of the income distribution are in line for an effective annual tax increase of $750-$850, while households in the top 40 per cent of the distribution will see a net annual tax cut of between $700 and $1,000.
This peculiar outcome is unique to B.C. and arises because the NDP government structured the Climate Action Rebate as an income redistribution tool, unlike the other provinces. Under the B.C. policy, the government returned roughly 40 per cent of all carbon tax revenue to lower income households via the Climate Rebate and retained the remaining 60 per cent to be used for other purposes. Income testing also permitted the government to provide modest income support to lower-income households beyond their direct carbon tax costs.
Canada’s national carbon tax has also been scrapped in provinces that adopted the federal government’s backstop carbon pricing scheme. In other provinces, all households received climate rebates irrespective of income. In these jurisdictions, the governments effectively transferred 100 per cent of carbon tax revenue to households. Because B.C. didn’t follow this path, we are the only province about to experience a sizable fiscal hit in the post-carbon tax world.
Eliminating the carbon tax will be positive for economic growth. But the tax itself was responsible for only a small portion of the economic slowdown and projected declines in both GDP and GHG emissions attributable to the CleanBC Plan. Extensive modelling by the government showed that meeting the aggressive 2030 emission targets required layering 24 additional policy measures on top of the carbon tax. These included a costly low carbon fuel standard, a hard cap on emissions from the fossil fuel sector, a hard cap on emissions across all other industries collectively, and the legislated adoption of new technologies and equipment.
The government’s modelling estimated that CleanBC would reduce real GDP growth by an average of 0.7 percentage points annually over the 2019-2024 period. This translates into a cumulative output loss of $29.4 billion. The modelling further showed that economic growth would be diminished by a full percentage point annually over 2025-2029. In total, over the 2019-2029 period, CleanBC was expected to yield a cumulative economic loss of $132.9 billion – a staggering sum.
Getting rid of the carbon tax is step one in untangling B.C.’s complex mix of climate policies. Making the province a more attractive place for capital investment and business growth will require a wholesale rethink of the rest of the CleanBC Plan.
CleanBC was hatched by a small group of government-appointed advisors focused solely on domestic GHG emissions, not the province’s economic well-being. The NDP government loudly trumpeted CleanBC’s purported benefits, while steadfastly ignoring (and at times denying) there would be any negative income or employment fallout from the plan—despite its own modelling and analysis showing the exact opposite. In the circumstances, we believe the word “deception” fits.