End of consumer carbon tax leaves $1.5-billion hole in B.C. budget

Minister of Finance Brenda Bailey tables her first budget in the legislative assembly at legislature in Victoria, B.C., on Tuesday, March 4, 2025. THE CANADIAN PRESS/Chad Hipolito

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 that “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., says that leaves about $1.5 billion in revenue the province will need to make up, which could include cutting spending or raising taxes elsewhere.

He says the end of the consumer carbon tax will bring relief at the gas station — as much as about 17 cents per litre.

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

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 after announcing Friday that his government would follow through on its promise to repeal the province’s consumer carbon tax after the new 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, which ends March 31, and the finance minister would provide further details.

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

Eby said the carbon tax has been an important tool for the province 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 consumer tax has been “under-delivering” when it comes to encouraging climate action at the individual level, Antweiler 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 the province’s climate plan is the expansion of the liquefied natural gas industry. B.C. had been underestimating the industry’s leakage of methane, a potent natural gas, Antweiler noted.

Antweiler 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 all of the companies have an incentive to cut emissions at a level that matches the “social cost of carbon,” or the cost to society from burning fossil fuels, he said.

The Canadian government has pegged that 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 Brenna Owen, The Canadian Press, was first published March 19, 2025.