How Effective Was the UK Carbon Tax?—A Machine Learning Approach to Policy Evaluation

47 Pages Posted: 17 Apr 2019

See all articles by Jan Abrell

Jan Abrell

ETH Zürich - Centre for Energy Policy and Economics (CEPE)

Mirjam Kosch

ETH Zürich

Sebastian Rausch

ZEW – Leibniz Centre for European Economic Research; Heidelberg University - Alfred Weber Institute for Economics

Date Written: April 17, 2019

Abstract

Carbon taxes are commonly seen as a rational policy response to climate change, but little is known about their performance from an ex-post perspective. This paper analyzes the emissions and cost impacts of the UK CPS, a carbon tax levied on all fossil-fired power plants. To overcome the problem of a missing control group, we propose a novel approach for policy evaluation which leverages economic theory and machine learning techniques for counterfactual prediction. Our results indicate that in the period 2013-2016 the CPS lowered emissions by 6.2 percent at an average cost of e18 per ton. We find substantial temporal heterogeneity in tax-induced impacts which stems from variation in relative fuel prices. An important implication for climate policy is that a higher carbon tax does not necessarily lead to higher emissions reductions or higher costs.

JEL Classification: C54, Q48, Q52, Q58, L94)

Suggested Citation

Abrell, Jan and Kosch, Mirjam and Rausch, Sebastian, How Effective Was the UK Carbon Tax?—A Machine Learning Approach to Policy Evaluation (April 17, 2019). USAEE Working Paper No. 19-396, Available at SSRN: https://ssrn.com/abstract=3373705 or http://dx.doi.org/10.2139/ssrn.3373705

Jan Abrell

ETH Zürich - Centre for Energy Policy and Economics (CEPE) ( email )

8092 Zurich
Switzerland

Mirjam Kosch

ETH Zürich ( email )

Zürichbergstrasse 18
8092 Zurich, CH-1015
Switzerland

Sebastian Rausch (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

HOME PAGE: http://www.sebastianrausch.com

Heidelberg University - Alfred Weber Institute for Economics ( email )

Grabengasse 14
Heidelberg, D-69117
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
63
Abstract Views
867
rank
383,158
PlumX Metrics