British Columbia’s revenue-neutral carbon tax: A review of the latest “grand experiment” in environmental policy

• Published in: Energy policy Vol. 86; pp. 674 - 683
• Main Authors: Murray, Brian, Rivers, Nicholas
• Format: Journal Article
• Language: English
• Published: Kidlington Elsevier Ltd 01.11.2015; Elsevier Science Ltd
• Subjects: Air pollution; British Columbia; British Columbia Canada; Carbon; Carbon dioxide; Carbon tax; Computer simulation; Economics; Emission price; Emissions; Emissions control; Environmental policy; Environmental tax; Evaluation; Fossil fuels; Greenhouse effect; Greenhouse gases; Implementation; Income; Income distribution; Neutrality; North America; Policies; Policy; Public opinion; Public opinion surveys; Revenue; Studies; Tax revenue; Tax revenues; Taxation; British Columbia Canada; Canada; Canada, British Columbia; Policy; Evaluation; Emission price; Carbon tax
• ISSN: 0301-4215; 1873-6777
• DOI: 10.1016/j.enpol.2015.08.011

In 2008, British Columbia implemented the first comprehensive and substantial carbon tax in North America. By 2012, the tax had reached a level of C$30/t CO2, and it covers about three-quarters of all greenhouse gas emissions in the province. This paper reviews existing evidence on the effect of the tax on greenhouse emissions, the economy, and the distribution of income, and provides new evidence on public perceptions of the tax. Empirical and simulation models suggest that the tax has reduced emissions in the province by between 5% and 15% since being implemented. At the same time, models show that the tax has had negligible effects on the aggregate economy, despite some evidence that certain emissions-intensive sectors face challenges. Studies differ on the effects of the policy on the distribution of income, however all studies agree that the effects are relatively small in this dimension. Finally, polling data shows that the tax was initially opposed by the majority of the public, but that three years post-implementation, the public generally supported the carbon tax. •We review the experience with the carbon tax in British Columbia.•The carbon tax has reduced greenhouse gas emissions by 5–15%.•The carbon tax has a negligible impact on overall economic activity.•Public support for the carbon tax increased over time.