Required Information Using Economics to Fight Climate Change British Columbians are justifiably proud of their spectacular environment, and they want to protect it. One of the greatest challenges they-and all of us-face is global climate change. How can we move our economy to a low-carbon future? The province has taken a bold and important step in that direction by adopting a tax on carbon fuels. In 2008, British Columbia (BC) passed the first broad-based carbon tax in North America. The idea of a carbon taxi provide a price incentive to find alternatives, such as investing in efficiency or renewable energy. The tax is small for most fuel consumers. less than 8 cents per liter of gasoline, for example, but it adds up for institutional consumers of fuel. Opponents have claimed the tax would "destroy jobs and growth," but the opposite has been true. The latest numbers from Statistics Canada show that the carbon tax has been a tremendous environmental and economic success. Since the tax came into effect, fossil fuel use has dropped by 16 percent in BC compared to a 3.5 percent increase in the rest of Canada. At the same time, the BC economy has grown faster and unemployment has been lower than any other province. The BC carbon tax is designed to be revenue neutral. That is, every penny taken in by the tax is used to reduce other taxes. Roughly 65 percent of the income is used to decrease corporate taxes. About 35 percent goes to lower personal taxes. Half that amount is targeted to low-income families and individuals for whom the carbon tax creates a particular disadvantage. And about half the corporate tax reductions are targeted for industries, such as clean energy, digital media and film, international businesses, and investment capital that the government wants to encourage. The result is that BC has the lowest personal income tax rate in Canada, and one of the lowest corporate rates in North America. Tax reductions have actually been greater than the amount taken in by the carbon tax. The difference is made up by increased taxes in sectors stimulated by tax shifts (fig. 15.1). Passing this carbon tax was easier in BC than in other places because approximately 95 percent of the province's electricity currently comes from hydroelectric dams, which don't need carbon fuels. Still, most people heat their homes with coal or natural gas, and fuel their vehicles with petroleum-based fuels. The carbon tax started out low (C$10 per metric ton of CO2) to ease people into the new system, and then rose gradually, reaching C$35 per ton in 2018. It will continue to rise until it reaches C$50 per ton in 2021. Observing the economic and climate benefits of the BC carbon tax, the rest of Canada has followed suit. A similar federal tax, again starting at C$10 per ton, is slated to increase to C$50 per ton by 2022 Nearly 60 percent of BC's residents approved of the carbon tax when it was first proposed. Support has varied over time and among constituencies, but most people are aware of the urgency of climate change. They have seen their forests devastated by drought, insect infestations, and increasing forest fires. They know their hydropower depends on winter snowpack and that droughts, heat waves, and storms undermine regional and national economies. The idea of using tax policy to discourage harmful actions (pollution, climate change) and to reward beneficial sectors (such as renewable energy) is a fundamental idea in economic theory. Economists generally hold that a tax on carbon is the most transparent and efficient approach to reducing emissions. It provides a direct price incentive to find ways to reduce emissions, rather than imposing regulatory rules or indirect incentives. Economists also approve of revenue- neutral taxes, which don't just increase the size of government. This fiscal reform is especially appealing when it may bring a double dividend: reducing pollution and stimulating economic growth in renewable energy and conservation. There still are many people who object to new taxes of any sort. Even when climate change threatens our economy and life as we know it, the concept of a new tax is difficult for many to swallow. Despite these concerns, most British Columbians have found that their total tax bill has gone down significantly with this measure. And poorer people, as well as those in remote areas, have benefited from programs supported by the tax. In this chapter we explore two related issues of how we occupy and make decisions about our environment. We examine cities, where most of us live, and the environmental challenges and opportunities associated with the ways we choose to build our cities. We then explore the economic concepts and incentives that shape the decisions we make. Because while concern for environmental quality and biodiversity frequently drive priorities in resource use, final decisions often involve economic questions of costs, benefits, and trade-offs.