British Columbia's Carbon Tax Research Articles

The effectiveness of environmental protection policies on greenhouse gas emissions

In Canada, greenhouse gas (GHG) emissions continue to remain high despite the federal government's commitment to reduce GHG emissions. Environmental policy across Canadian provinces has largely lacked consistency with some provinces implementing targeted policy such as carbon taxes while others have strongly resisted the federal government's attempts to encourage such policy. This study examines the impact of environmental policy on GHG gas emissions across Canadian provinces with policy uniquely measured by public and business sector spending on environmental protection as well as notable province-specific policies. An extended STIRPAT model is specified with the inclusion of proxies for environmental policy using panel data from Canada's ten provinces from 1995 to 2019. The cointegration and the error correction modelling approaches are employed to estimate the non-stationary panel data. A pooled mean group estimation is applied to provide short run and long run coefficients. The findings indicate that although per capita GDP is the main driver of GHG emissions in Canada, environmental policy has a significant mitigating effect, as shown by the negative association between emissions and private and public sector spending on environmental protection in the long run. Furthermore, provinces with targeted policies, such as Ontario's coal phase-out and British Columbia's carbon tax, experienced significant emissions reductions. The theoretical implication is the successful addition of policy variables to the STIRPAT model, providing the model a new application for future research.

The Carbon Tax Effect on British Columbia Economy and Carbon Emission

A carbon tax is the most common carbon emission control policy widely used. British Columbia is the first Canadian province to use a carbon tax and implementing a carbon tax will impact British Columbia's environment and economy. This paper analyzes the scale of the carbon tax, energy consumption, GHG emission, and government revenue in British Columbia to evaluate the effect of the carbon tax. This paper finds that a carbon tax has no impact on dramatically reducing GHG British Columbia emissions, but it can help the government get more revenue. Although the carbon tax has little effect on reducing carbon emissions in British Columbia, the carbon emissions in British Columbia have been significantly reduced compared to other provinces. Therefore, we believe that the British Columbia carbon tax has a significant impact on controlling CO2 emissions, and the value of carbon emissions can be further controlled by increasing the carbon tax.

The Political Viability of Carbon Pricing: Policy Design and Framing in British Columbia and California

AbstractThe adoption of climate policies with visible, substantial costs for households is uncommon because of expected political backlash, but British Columbia's carbon tax and California's cap‐and‐trade program imposed such costs and still survived vigorous opposition. To explain these outcomes, this article tests hypotheses concerning policy design, framing, energy prices, and elections. It conducts universalizing and variation‐finding comparisons across three subcases in the two jurisdictions and uses primary sources to carry out process tracing involving mechanisms of public opinion and elite position‐taking. The article finds strong support for the timing of independent energy price changes, exogenous causes of election results, reducing the visibility of carbon pricing, and using public‐benefit justifications, as well as some support for making concessions to voters. By contrast, the effects of the use of revenue, industry exemptions/compensations, and making polluters pay are not uniform, because the effects of revenue use depend on how it is embedded in coalition building efforts and a middle path between exempting or compensating industry and burdening it appears to be more effective than pursuing just one or the other approach.

The long and short run effects of British Columbia's carbon tax on diesel demand

In 2008, the government of the province of British Columbia (B.C.) broke new ground in North America by introducing a revenue-neutral carbon tax on fossil fuel use. The rate was initially set at $10/ton of CO2 and then raised annually by increments of $5 to reach $30/ton in 2012. We measure the impact of the tax on diesel users; these are primarily businesses involved in heavy industries, mining, construction, and commercial transportation, and they represent 18.2% of B.C. fossil fuel emissions. Based on a cointegration equation and a related error-correction model, we find that, over 2008–2016, the combined long and short run carbon tax impact has resulted in an average of 5.85 cent/litre increase at the pump, and a reduction of 1.24 L in monthly per capita diesel consumption. The average annual reduction amounts to 1.3% of B.C. 2008 diesel emissions and 0.2% of total emissions in the province in that same year. This decrease is relatively modest when we consider Canada's Paris Agreement commitment to reduce GHG emissions by 30% by the year 2030.

The Effect of Carbon Tax on Farm Income: Evidence from a Canadian Province

British Columbia (BC) introduced North America’s first carbon tax in 2008. An analysis of the impact of the BC carbon tax is of interest to various stakeholders in the jurisdiction where the tax was implemented. Other Canadian provinces and other countries contemplating a carbon tax policy are looking for insights on how to optimize potential positive and negative consequences. Given that government agri-environmental policies often emphasize farm-level support and environmental performance, there is interest in understanding the farm-level impacts of the carbon tax. The effect of the BC carbon tax on farm income and related production cost variables is investigated. Panel data from 2000 to 2015 are analyzed using both tabular and econometric approaches of the difference-in-difference method. The results indicate that the carbon tax is associated with a decline in net farm income-to-receipts ratios ranging between 8 and 12 cents per dollar of farm receipts. The analysis for costs-to-receipts ratios suggest that the carbon tax is directly related to higher commercial feed costs, farm labour costs, interest costs, and depreciation costs. Results of the regression analysis indicate that all the carbon tax effects are highly statistically significant. These findings can inform policy discussions about carbon tax effects on farmers.

On the Economics of a Carbon Tax for the United States

Climate change is driven by the buildup of greenhouse gases (GHGs) in the atmosphere, which is predominantly the result of the world's consumption of fossil fuels. GHGs are a global pollution externality for which a global solution is required. I describe the role a domestic carbon tax could play in reducing U.S. emissions and compare and contrast alternative approaches to reducing our GHG pollution. Carbon taxes have been implemented in 23 jurisdictions around the world. I provide evidence on emission reductions and the economic impact of British Columbia's carbon tax, a broad-based carbon assessment that has been in effect for over a decade. I also provide an analysis of carbon taxes used in the countries that belong to the European Union.

The impact of British Columbia's carbon tax on residential natural gas consumption

We estimate the effect of British Columbia's (BC) carbon tax on per capita residential natural gas consumption using panel data regression and synthetic control models. We use province and state-level data documenting annual natural gas consumption from 1990 through 2014. Results from the panel data regression model suggest that the carbon tax substantially reduced residential natural gas consumption. Our preferred approach is the synthetic control method that we use to select a group of provinces and states against which BC's residential natural gas consumption trends can be compared. Using the synthetic control approach we find that the BC carbon tax reduced per capita residential natural gas consumption by approximately 7%.

Refining the Evidence: British Columbia's Carbon Tax and Household Gasoline Consumption

The impact of carbon prices on consumer behavior is a central element in current policy debates dealing with mitigation of greenhouse gas emissions. In this article, we examine the impact of British Columbia’s carbon tax on household consumption of gasoline for private automobile use. Our use of household-level data on gasoline expenditures allows us to control for several factors that influenced gasoline demand during our study period, including local public transit improvements and increased cross-border shopping in Washington State. Overall, our results suggest that a 5 cent per litre carbon tax reduced gasoline consumption by 8%. We find that households residing in Vancouver and other cities responded to the carbon tax, whereas households in small towns and rural areas did not respond. We perform several sensitivity analyses accounting for carbon leakage and the potential that the carbon tax was not fully passed through to the retail price of gasoline. Even our most conservative lower bound estimate suggests that a 5 cent per litre carbon tax reduced gasoline consumption by 5%.

Carbon Pricing: Design, Experiences and Issues, edited by LarryKreiser, MikaelAndersen, BirgitteOlsen, StefanSpeck, JanetMilne and HopeAshiabor. Published by Edward Elgar Publishing, Cheltenham, UK, 2015, 256 pages. ISBN: 9781785360220, ₤75.

Carbon Pricing: Design, Experiences and Issues, edited by LarryKreiser, MikaelAndersen, BirgitteOlsen, StefanSpeck, JanetMilne and HopeAshiabor. Published by Edward Elgar Publishing, Cheltenham, UK, 2015, 256 pages. ISBN: 9781785360220, ₤75.

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.

Firm responses to a carbon price: corporate decision making under British Columbia's carbon tax

Top-down economic approaches theoretically show that placing a price on carbon can reduce emissions. Responses by firms to these policies, however, are less well understood and are critical for understanding the effectiveness of price-based carbon policy. This article provides an analysis of firm-level responses to the carbon tax in British Columbia (BC) through empirical research of grey literature, industry participation, and interviews with executives of major emitting firms in BC. The article highlights the empirical responses to the tax by firms, who experience difficulty in making low-carbon changes in response to fluctuating commodity prices, the low certainty of climate policy over temporal and spatial scales, and the political economy of implementing regional climate policy. It also highlights the importance of understanding firm-level responses as a complementary approach to macro-economic policy making on carbon pricing. The article shows the importance of engaging decision makers in corporations to understand how carbon is governed in light of emerging climate policy.Policy relevanceThis article is relevant to policy makers implementing carbon-pricing initiatives by illustrating the need to complement macroeconomic models with firm-level response analysis. It also demonstrates the key concerns of executives in a resource extractive economy and the ability of a carbon price, and the need for complementary technology funds and policy, to affect change in industrial emissions.

Carbon Taxation in British Columbia

Among alternative public policies to reduce emissions of carbon dioxide and other greenhouse gases (GHGs), environmental taxation represents a promising but often under-utilized approach-particularly in North America where the introduction of any new tax involves enormous political challenges. In Canada, however, British Columbia became the first North American jurisdiction to implement a consumption-based environmental tax specifically designed to reduce GHG emissions when BC's provincial government enacted a carbon tax effective July 1, 2008. This paper provides a general overview and initial evaluation of British Columbia's carbon tax, explaining the background to the announcement of the tax in the Provincial Government's 2008 Budget, the structure of the legislation and its relation to other provincial initiatives to address climate change, and the possible implications of the tax for climate change policy in Canada. Part I provides a short background to the tax, summarizing the evolution of Canadian climate change policies up to the announcement of the tax in February 2008. Part II explains the structure of the carbon tax and its relation to other provincial climate change policies, reviewing the Provincial Budget and the specific tax implementing legislation. Part III discusses the implications of the tax for climate change policy in Canada, considering public reaction to the tax in British Columbia and subsequent developments at the federal level.

Carbon Taxation in British Columbia

Among alternative public policies to reduce emissions of carbon dioxide and other greenhouse gases (GHGs), environmental taxation represents a promising but often under-utilized approach-particularly in North America where the introduction of any new tax involves enormous political challenges. In Canada, however, British Columbia became the first North American jurisdiction to implement a consumption-based environmental tax specifically designed to reduce GHG emissions when BC's provincial government enacted a carbon tax effective July 1, 2008. This paper provides a general overview and initial evaluation of British Columbia's carbon tax, explaining the background to the announcement of the tax in the Provincial Government's 2008 Budget, the structure of the legislation and its relation to other provincial initiatives to address climate change, and the possible implications of the tax for climate change policy in Canada. Part I provides a short background to the tax, summarizing the evolution of Canadian climate change policies up to the announcement of the tax in February 2008. Part II explains the structure of the carbon tax and its relation to other provincial climate change policies, reviewing the Provincial Budget and the specific tax implementing legislation. Part III discusses the implications of the tax for climate change policy in Canada, considering public reaction to the tax in British Columbia and subsequent developments at the federal level.