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Does a Carbon Tax Reduce CO2 Emissions? Evidence From British Columbia

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Document pages: 50 pages

Abstract: Using difference-in-differences, synthetic control, and introducing a new break-detection approach I show that, besides a 5 reduction in transportation emissions, the introduction of North America’s first major carbon tax has not ‘yet’ led to a statistically significant reduction in aggregate CO2 emissions. Proposing a new method to assess policy based on breaks in difference-in-differences using machine learning, I demonstrate that neither carbon pricing nor trading schemes in other Canadian provinces are detected as significant interventions. Instead, closures and efficiency-improvements in emission-intense industries in untaxed provinces have reduced emissions. Overall, the results show that existing carbon taxes (and prices) are too low to be effective in the time frame since their introduction.

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