Does a Carbon Tax Reduce CO2 Emissions? Evidence From British Columbia
51 Pages Posted: 25 Feb 2019 Last revised: 25 Nov 2019
Date Written: February 8, 2019
Using difference-in-differences, synthetic control, and introducing a new break-detection approach I show that, besides a 5% reduction in transportation emissions, the introduction of a carbon tax has not ‘yet’ led to a statistically significant reduction in aggregate CO2 emissions in British Columbia. Proposing a new method to assess policy based on breaks in difference-in-differences using machine learning, I demonstrate that neither carbon pricing nor trading schemes in other Canadian provinces are detected as significant interventions. Instead, closures and efficiency-improvements in emission-intense industries have reduced emissions. Overall, the results show that existing carbon taxes (and prices) are too low to be effective.
Keywords: Carbon Tax, CO2 Emissions, Regulation, Break Detection
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