VANCOUVER — 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 B.C., 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.
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.
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.
Eby said the carbon tax has been an important tool for more than 15 years, but 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.
The Opposition B.C. Conservatives ran on an election platform that called for an end to the carbon tax, but they also voiced concern that Eby's government would scrap the consumer levy, while increasing charges on businesses and industry.
B.C. Conservative Finance critic Peter Milobar said the province collects "very little," about $200 million, from the industrial carbon pricing program.
"If they choose to start putting any significant portion of that $1.5 billion (in lost revenue) onto industry, I think, you know, we need to know the answers to that," he said in an interview on Wednesday.
Milobar also said the end of the climate tax credit is a blow for low-income people who also won't receive a $1,000 grocery rebate the NDP had promised during the fall election campaign, only to cancel it in the spring budget.
The BC Greens, meanwhile, 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.
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.
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.
The consumer tax has been "under-delivering" on encouraging climate action at the individual level, he said, while policies such as B.C.'s zero-emission vehicles mandate and low-carbon fuel standard hold more promise.
But he said the "elephant in the room" for B.C.'s climate plans is the expansion of the liquefied natural gas industry. The province had been underestimating the industry's leakage of methane, a potent natural gas, Antweiler said.
He said the goal of the carbon pricing system for industrial operations with annual emissions greater than 10,000 tonnes of carbon dioxide or equivalencies is to "create a wedge between the leaders and the laggards in the industry."
It involves making sure companies have an incentive to cut emissions at a level matching the "social cost of carbon," or the cost to society from burning fossil fuels, he said.
The Canadian government has pegged that social cost at $271 per tonne of carbon dioxide for 2025, while B.C.'s rate for industry is currently $80 per tonne of emissions exceeding a certain threshold.
This report by The Canadian Press was first published March 19, 2025.
Brenna Owen, The Canadian Press
