B.C.’s Carbon Tax on Fuel
B.C.’s carbon tax operates as a sales tax applied to the purchase and use of fossil fuels including gasoline, diesel, natural gas, heating fuel, propane, coal, and certain other materials including peat and tires when used to produce energy and covers approximately 70% of provincial greenhouse gas (GHG) emissions.
As of April 1, 2021, the tax rate is $45 per tonne of carbon dioxide (CO2) equivalent emissions, which is up from the previous tax rate of $40 per tonne for 2019-2020. The tax charged per unit of fuel consumed differs depending on the type of fuel – from 8.82¢ per cubic metre of natural gas to $101.34 per tonne of high heat value coal. The tax rate is scheduled to continue rising at an annual rate of $5 per tonne of CO2 equivalent emissions, topping out at $50 in April 2022 (in line with federal requirements for that year).
In 2008, B.C. introduced the carbon tax as a “revenue-neutral” tax on the purchase and use of fuels within the province. The provincial government returned these revenues to taxpayers through the reduction of other provincial taxes. In its 2017 Budget Update, the province announced that the carbon tax would no longer be “revenue-neutral.” Revenues generated from B.C.’s carbon tax are now used to provide carbon tax relief and protect affordability, maintain industry competitiveness and fund new green initiatives.
Greenhouse Gas Industrial Reporting and Control Act
The Greenhouse Gas Industrial Reporting and Control Act (the Act) provides for the establishment of specific performance standards for industrial facilities or sectors. At present, the Act requires liquefied natural gas (LNG) facilities to report their GHG emissions and adhere to an emissions benchmark by:
- reducing emissions to meet the applicable benchmark
- earning or purchasing emissions offsets from approved emission offset projects
- applying earned credits from prior years when facility emissions were below benchmark requirements (which credits can also be purchased from third party regulated facility operators); or
- purchasing government-generated credits (referred to as “funded units”). No other industrial operations are currently subject to this regime.
The emissions limit for LNG facilities is 0.16 tonnes of GHG emissions for each tonne of LNG produced by the operator. The emissions accounting for LNG operations includes all GHG emissions from the point gas enters a facility to the point it is loaded onto a mode of transportation, such as a ship or rail car. This appears to capture emissions from ancillary operations to the LNG plants such as “inside the fence” natural gas-fired power generation.
Much of the legislation’s mechanics are set out in the regulations adopted under the Act, which combine several pieces of existing GHG legislation into a single legislative framework.
Alongside the Act, a number of regulations came into effect in January 2016, including the following:
- Greenhouse Gas Emission Reporting Regulation, which requires industrial operations emitting over 10,000 CO2 equivalent tonnes per year to report their GHG emissions annually to the province. Operators who emit over 25,000 tonnes of CO2 per year are required to have their emissions independently verified. The regulation also prescribes the compliance reporting requirements.
- Greenhouse Gas Emission Control Regulation, which establishes the B.C. Carbon Registry to monitor compliance unit transactions and enable the issuance, transfer and retirement of compliance units. This regulation also enables regulated operators whose emissions exceed prescribed limits to comply with the legislation by purchasing offsets from the market or funded units from the government. Moreover, offset units can be earned through the removal or reduction of GHG emissions via approved emission offset projects verified by third-party verification procedures.
- Greenhouse Gas Emission Administrative Penalties and Appeals Regulation, which prescribes applicable administrative penalties for non-compliance with the Act and regulations. This regulation also outlines the appeal process for decisions the Director makes under the Act.
Zero-Emission Vehicles Act
Enacted in 2019, the Zero-Emission Vehicles Act sets out the following targets for light-duty vehicles:
- in 2025 and in each subsequent year, at least 10% of all new light-duty motor vehicles sold or leased in B.C. must be zero-emission vehicles;
- in 2030 and in each subsequent year, at least 30% of all new light-duty motor vehicles sold or leased in B.C. must be zero-emission vehicles; and
- in 2040 and in each subsequent year, 100% of all new light-duty motor vehicles sold or leased in B.C. must be zero-emission vehicles
Manufacturers that do not comply with the zero-emission requirements can purchase offset credits from the provincial government to remain in compliance with the Zero-Emission Vehicles Act.
Greenhouse Gas Reduction (Emissions Standards) Statutes Amendment Act
The Greenhouse Gas Reduction (Emissions Standards) Statutes Amendment Act (the Amendment Act) amended the Environmental Management Act, Forest Act, and Forest and Range Practices Act. It focuses on reducing GHG emissions from certain industrial operations, while simultaneously creating additional opportunities for the bioenergy sector.
The Amendment Act requires waste-management operations to manage their GHG emissions by reducing or capturing them. It also provides authority for the Landfill Gas Management Regulation. Additionally, it enables provincial regulation of zero and net-zero GHG emissions for electricity generating facilities.
Renewable and Low Carbon Fuel Requirements Regulation
The Greenhouse Gas Reduction (Renewable and Low Carbon Fuel Requirements) Act and the Renewable and Low Carbon Fuel Requirements Regulation set requirements that currently apply to all companies supplying gasoline and diesel class fuel within B.C. Subject to exemptions available for small suppliers, fuel suppliers must ensure fuels have a minimum renewable fuel content by volume (4% for diesel and 5% for gasoline), and meet targets for reducing fuel carbon intensity.
Companies that supply less than a total of 75 million litres of gasoline and diesel class fuels in 2020 must report gasoline and diesel fuel volumes but may apply to be exempt from the Regulation’s renewable fuel and carbon intensity requirements. The limit for exemption eligibility will drop to 25 million litres for the 2021 compliance period, and to 200,000 litres for 2022 onward.
B.C. amended the Regulation’s carbon intensity targets in 2020 to reflect the goal of reducing transportation fuels’ lifecycle carbon intensity 20% by 2030 (the original goal when the Regulation came into effect in 2010 was to reduce the lifetime carbon intensity 10% by 2020).
Each year, a fuel supplier must submit a report to the Director that includes the credits it generated or debits it incurred for each gasoline and diesel class fuel it supplied that year. Credits and debits are calculated according to a formula that accounts for the prescribed carbon intensity limit and energy efficiency ratio for the fuel class, as compared to the fuel’s actual carbon intensity and energy content. Credits are generated when a fuel’s actual carbon intensity is below the target carbon intensity and debits are incurred when a fuel’s actual carbon intensity exceeds the carbon intensity target.
To comply with the carbon intensity targets, a fuel supplier can:
- reduce the carbon intensities of the fuels it supplies year-over-year to meet the prescribed targets
- buy credits from other fuel suppliers to apply against its debits; or
- earn credits through “Part 3 Agreements” which it can apply against its debits
Fuel suppliers with a net debit balance at year’s end must pay an administrative penalty of $200/debit. Fuel suppliers that generate credits can retain those credits for future compliance years, or trade them with other suppliers – creating a Credit Market.
A “Part 3 Agreement” is an agreement between a fuel supplier and the Director under the Act to take actions which have a reasonable possibility of reducing GHG emissions sooner than would occur without the agreed-upon action. B.C.’s Applying for a Part 3 Agreement Project page lists project categories supported under Part 3 Agreements. Like other credits, Part 3 Agreement credits may be used to meet the supplier’s own compliance obligations or may be transferred to other fuel suppliers.
Climate Change Accountability Act
The Climate Change Accountability Act (the CCAA) sets targets to reduce GHG emissions to 40% below 2007 levels by 2030, to 60% below 2007 levels by 2040, and to 80% below 2007 levels by 2050. Under the CCAA, B.C. has also set an interim target of 16% reduction below 2007 levels by 2025.
The CCAA required the Minister of Environment and Climate Change (the Minister) to establish sector-specific targets for GHG reductions by March 31, 2021, and requires the Minister to review these targets by the end of 2025, and at least once every five years thereafter. On March 26, 2021, the Minister set sectoral targets in four categories:
- Transportation: 27 to 32% below 2007 levels by 2030
- Buildings and communities: 59 to 64% below 2007 levels by 2030
- Oil and gas: 33 to 38% below 2007 levels by 2030
- Industry: 38 to 43% below 2007 levels by 2030
Clean Energy Act
Since 2010, B.C.’s Clean Energy Act (the CEA) has sought to make the province self-sufficient in electricity generation beginning in 2016 and continuing each year after that, with a clean and renewable energy target of 93%. Electricity used to serve facilities that liquefy natural gas for export from B.C. by ship are excluded from CEA’s 93% renewable energy target, pursuant to B.C.’s Energy Objectives Regulation.
The Act also seeks to make the province a net exporter of clean and renewably generated electricity. The legislation further creates a smart-metre requirement for electricity consumption management, mandates reductions in the province’s GHG emissions to 2050, and establishes a feed-in tariff program for emerging technologies.
Under the CEA, biomass, biogas, geothermal heat, hydro, solar, ocean and wind are classified as clean or renewable resources. The Clean or Renewable Resource Regulation adds biogenic waste, waste heat and waste hydrogen to this list.
In addition to the above legal requirements and associated legislation, B.C.’s approach to GHG management is guided by several overarching policy initiatives, as outlined below.
Climate Leadership Plan
On August 19, 2016, the province released its Climate Leadership Plan [PDF](the Plan), which updated the province’s 2008 Climate Action Plan [PDF]. The Plan sets out 21 actions B.C. will take to meet its 2050 emissions reduction target of 80% below 2007 levels. Sectors targeted by these actions include:
- natural gas;
- forestry and agriculture;
- communities and built environment;
- industries and utilities; and
- the public sector.
Released in 2018, the CleanBC Strategy [PDF] outlines the provincial government’s goal to:
- make every new building constructed in the province “net-zero energy ready” by 2032;
- ensure all new cars are zero-emission vehicles by 2040;
- increase the low carbon fuel standard to 20% by 2030 and increase the production of renewable transportation fuels;
- increase tailpipe emissions standards for vehicles sold after 2025;
- require that a minimum of 15% of residential and industrial natural gas consumption come from renewable gas;
- reduce methane emissions from upstream oil and gas operations by 45%; and
- increase access to clean electricity for large operations with new transmission lines and interconnectivity to existing lines.
Through these actions, the B.C. government expects to meet 75% of its GHG reductions commitment by 2030. The remaining 25% will be addressed through a Phase 2 update of the CleanBC Strategy not yet released.
Climate Solutions and Clean Growth Advisory Council
Established in 2018, the Climate Solutions and Clean Growth Advisory Council provides strategic advice to the B.C. government on climate action and economic growth. It includes members from First Nations, environmental organizations, industry, academia, labour and local government. The Advisory Council has submitted advice to government on matters including B.C.’s Climate Preparedness and Adaptation Strategy, protecting B.C.’s Emissions-Intensive Trade Exposed industries, and achieving B.C.’s 2030 GHG emission reduction targets.