Date of Award
Carbon Tax, Carbon Leakage, Amplified Behavioral Response
Econometrics | Environmental Policy
British Columbia (BC) implemented a carbon tax in 2008 at the rate of ten Canadian dollars (CAD) per metric ton of carbon dioxide equivalents (CO2e). In April of 2019, the tax was set at a rate of CAD 40 per metric ton of CO2e with a dual mandate to reduce fuel consumption while not contracting economic output. This paper attempts to estimate the effect of British Columbia’s carbon tax on per capita gasoline consumption using panel data regression. To assess the empirical evidence, provincial-level monthly data from ten Canadian provinces was collected and analyzed over the period 1991 to 2018. Results from this analysis suggest that a five-cent increase in the carbon tax was associated with a 5 to 9.3 percent reduction in gasoline consumption. In addition, the models indicated there to be an amplified behavioral response to the tax in the years immediately following its implementation. Evidence was also found suggesting the presence of carbon leakage, however, the effect leakage had on the carbon tax’s effect could not be determined.
Long, Martin A., "Running on Fumes: The Long and Short-Run Effects of British Columbia's Carbon Tax on Gasoline Consumption" (2020). Honors Thesis. 100.