A rural myth? Sources and implications of the perceived unfairness of carbon taxes in rural communities

Since British Columbia's carbon tax was implemented in 2008, local interest groups and municipal politicians have claimed that the tax places an unfair burden on rural communities. We investigate the sources of this perception of unfairness and its implications for policymaking. We examine the distributive effects of British Columbia's carbon tax using a computable general equilibrium model of the Canadian economy. We find that the rural population would indeed have experienced a disproportionate burden had the carbon tax been introduced without redistributive measures, but that the revenue recycling program introduced in parallel with the tax was sufficient to balance the inequity. Hence, the Northern and Rural Homeowner Benefit Program, a transfer program introduced later in response to public protests, was unnecessary. Additionally, analysis of polling data shows that the new program failed to increase support for the carbon tax in rural communities, despite making these households better off on average than households in large urban centers. We therefore conclude that this ongoing opposition is based on a rural myth. Policymakers should carefully investigate distributive impacts of carbon policies and address evidential inequities. Yet, before overcompensating groups that still feel disadvantaged, policymakers should address the myth of unfairness at its source.