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Evaluating carbon tax policy: A methodological reassessment of a natural experiment

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  • Arcila, Andres
  • Baker, John D.

Abstract

Heralded as the grand experiment in carbon tax policy, the Canadian province of British Columbia was on the forefront of North American environmental policy when it implemented a carbon tax in 2008. Despite being well-lauded in the literature, new data suggests that CO2 emissions and fossil fuel consumption have in fact risen in recent years. We test the effectiveness of the policy change using a synthetic control analysis and find that, contrary to the theoretical intuition about carbon taxation, CO2 emissions and gasoline consumption rose in British Columbia relative to the synthetic control. However, we do find there to be a reduced share of economic activity in the energy industry following the policy change.

Suggested Citation

  • Arcila, Andres & Baker, John D., 2022. "Evaluating carbon tax policy: A methodological reassessment of a natural experiment," Energy Economics, Elsevier, vol. 111(C).
    • Handle: RePEc:eee:eneeco:v:111:y:2022:i:c:s0140988322002201
    DOI: 10.1016/j.eneco.2022.106053
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    References listed on IDEAS

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    Cited by:

    1. Kumbhakar, Subal C. & Badunenko, Oleg & Willox, Michael, 2022. "Do carbon taxes affect economic and environmental efficiency? The case of British Columbia’s manufacturing plants," Energy Economics, Elsevier, vol. 115(C).
    2. Gordic, Dusan & Nikolic, Jelena & Vukasinovic, Vladimir & Josijevic, Mladen & Aleksic, Aleksandar D., 2023. "Offsetting carbon emissions from household electricity consumption in Europe," Renewable and Sustainable Energy Reviews, Elsevier, vol. 175(C).
    3. Gu, Haolei & Wu, Lifeng, 2024. "Pulse fractional grey model application in forecasting global carbon emission," Applied Energy, Elsevier, vol. 358(C).
    4. Tol, Richard S.J., 2023. "The fiscal implications of stringent climate policy," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 495-504.
    5. Attílio, Luccas Assis & Faria, João Ricardo & Rodrigues, Mauro, 2023. "Does monetary policy impact CO2 emissions? A GVAR analysis," Energy Economics, Elsevier, vol. 119(C).
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    7. Xing, Xiaoyun & Guo, Kun & Zhang, Dayong & Ji, Qiang, 2024. "On the interactive effects of climate policies: Insights from a stock-flow consistent model," Applied Energy, Elsevier, vol. 358(C).
    8. Du, Panpan & Li, Qiliang, 2024. "Evaluating carbon tax impact on natural resource extraction in developing regions: Implicating green recovery," Resources Policy, Elsevier, vol. 89(C).

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    More about this item

    Keywords

    Carbon tax; Climate change; Policy evaluation; Emissions; Gasoline tax;
    All these keywords.

    JEL classification:

    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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