Does a Carbon Tax Reduce CO2 Emissions? Evidence From British Columbia

50 Pages Posted: 25 Feb 2019 Last revised: 4 Feb 2020

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, synthetic control, and introducing a new break-detection approach I show that, besides a 5% reduction in transportation emissions, the introduction of North America’s first major carbon tax has not ‘yet’ led to a statistically significant reduction in aggregate CO2 emissions. 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 in untaxed provinces have reduced emissions. Overall, the results show that existing carbon taxes (and prices) are too low to be effective in the time frame since their introduction.

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

Suggested Citation

Pretis, Felix, Does a Carbon Tax Reduce CO2 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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