People are natural experimenters, and that’s a good thing. Infants learn to talk by mimicking the sounds they hear and responding to the reactions they get. Toddlers learn to walk by taking small, tentative steps, with few worries about whether they succeed or fail. At every age, experimentation helps us understand and adapt to changing conditions, both as individuals and through our governments, businesses, and other organizations.

To this end, I was interested to read a recent study out of the University of Ottawa, about tax changes in B.C. that were aimed at reducing provincial rates of fuel consumption and greenhouse gas emissions. In 2008, the B.C. government captured headlines by introducing a “revenue-neutral carbon tax shift” that would put a price on carbon-based fuels and use the revenue to reduce personal and corporate income taxes. The carbon tax was initially set at $10 and has now leveled off at $30 per tonne of CO2equivalent (about 7 cents/litre of gas).

This was not a new idea. Paul Hawken and other economists were talking about the benefits of a revenue-neutral carbon tax over 20 years ago (The Ecology of Commerce, 1993, pg. 183). But before it was brought in, the B.C. policy was controversial. Some economists and business leaders hailed it as a cost-effective way to address climate change, while critics warned that it would be a job-killing economic disaster. Now, five years later, it looks like the critics were wrong. Not only has the B.C. policy contributed to significant decreases in fossil fuel use and income tax rates (both personal and corporate), it has done so without harming the provincial economy.

So the risks of conducting this “experiment” seem to have been worth it. On par with several European countries, B.C. is now one of the few regions in North America that has put a price on carbon by implementing a successful tax shift. As research in this area continues, it will be interesting to see whether other policy-makers take notice and follow suit.

To learn more about the University of Ottawa study, which will soon be published in Canadian Public Policy, click here: