Does a Carbon Tax Reduce CO 2 Emissions? Evidence From British Columbia

23 Pages Posted: 25 Feb 2019

See all articles by Felix Pretis

Felix Pretis

University of Victoria, Department of Economics; University of Oxford - Institute for New Economic Thinking at the Oxford Martin School

Date Written: February 8, 2019

Abstract

Using difference-in-differences and a novel break-detection approach I show that the introduction of a carbon tax has not ‘yet’ led to a significant reduction in aggregate CO2 emissions in British Columbia, Canada. Despite the lack of detectable aggregate effect, there are heterogeneous emission reductions across sectors: the tax led to a reduction in emissions from transportation incl. personal vehicles (-5%), buildings (-5%), waste processing (-3%), and light manufacturing, construction and forestry (-11%). Introducing a new method to assess policy based on breaks in difference-in-differences fixed effect panel models, I demonstrate that neither the carbon tax, nor the carbon price and emissions trading schemes introduced in other Canadian provinces are detected as significant interventions in aggregate emissions. The absence of significant aggregate reductions in emissions is consistent with existing evidence that current carbon taxes (and prices) are too low to be effective.

Keywords: Carbon Tax, CO2 Emissions, Regulation, Break Detection

Suggested Citation

Pretis, Felix, Does a Carbon Tax Reduce CO 2 Emissions? Evidence From British Columbia (February 8, 2019). Available at SSRN: https://ssrn.com/abstract=3329512 or http://dx.doi.org/10.2139/ssrn.3329512

Felix Pretis (Contact Author)

University of Victoria, Department of Economics ( email )

3800 Finnerty Rd
Victoria, British Columbia V8P 5C2
Canada

University of Oxford - Institute for New Economic Thinking at the Oxford Martin School ( email )

Eagle House
Walton Well Road
Oxford, OX2 6ED
United Kingdom

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