Arguments
In charts: how a revenue neutral carbon tax cuts emissions, creates jobs, grows the economy
Posted on 13 June 2014 by dana1981
A revenue-neutral carbon tax or fee is a proposed policy to address global warming that's become increasingly popular, particularly in the US. It's a simple concept – put a much needed price on carbon pollution, but return all the revenue that's generated to taxpayers (for example with a monthly refund) to offset rising energy costs. This approach appeals to political conservatives, because it's a free market solution that doesn't increase the size of government.
British Columbia (BC) launched a revenue-neutral carbon fee in 2008, with the tax offset through a matching reduction income taxes. So far it's been very successful, decreasing carbon pollution while the BC economy performed just as well as the rest of Canada's. The carbon tax has 64% support among BC voters.
The main source of opposition to carbon pricing is the perception that it will 'kill jobs' or otherwise hurt the economy. However, economic forecasts have rarely been done for a carbon fee in which 100% the revenue is returned to the taxpayers. Under proposed revenue-neutral carbon tax legislation, about two-thirds of taxpayers are projected to receive more in refunds than they pay in higher energy prices. It's a net financial gain for most people. This is a key factor that differentiates a revenue-neutral carbon tax system and its economic impacts from other carbon pricing systems.
A new study from Regional Economic Models, Inc. (REMI) models this type of policy. REMI has been developing regional forecasting and policy analysis models since 1980. In their study (full report here, summary here), REMI modeled the regional and national economic impacts of a revenue-neutral carbon tax starting at a modest $10 per metric ton of carbon dioxide in 2016, growing steadily by $10 per year each year. They broke the US into nine distinct geographic regions.
The nine regions in the REMI study (Alaska and Hawaii are in the Pacific region)
A key finding in the study is that personal disposable income would increase under a revenue-neutral carbon tax in every region except for a slight decrease in the fossil fuel-heavy west south central states of Texas, Louisiana, Oklahoma, and Arkansas. This is in large part due to the fact that for most people, their monthly refunds would be larger than the increase in their energy costs. REMI report lead author Scott Nystrom explained the reason for this rise in disposable income,
“Personal income per capita goes up because households receive the total benefit of the dividend as well as improved job opportunities and wages in the general economy, which more than counteracts any negative effects from higher energy and commodity prices.”
Revenue neutral carbon tax regional level impact to aggregate personal income.
The study looked at the impact on the gross domestic and gross regional products (GDP and GRP), and found a positive effect in all regions except for the east south central US (no significant impact), and a negative effect in the west south central states. Overall, the national GDP increases by $80–90 billion annually, with a cumulative increase of over $1.3 trillion. Nystrom explained the GDP increase,
“GDP goes up because the fee and dividend provides a boost to consumer spending, reducing demand for fossil fuels does not have a significant impact on American employment and reduces energy imports from abroad, and the border adjustment means American firms are on a level playing field when it comes to competing on the world market.”
The impact to GRP for the nine regions from the revenue neutral carbon tax.
Likewise, total employment is projected to increase in every region except for a slight decrease in those same fossil fuel heavy southern states. Many of the jobs generated are in sectors like healthcare and retail, where people are anticipated to spend their newfound disposable income.
Net change in employment by region under a revenue-neutral carbon tax.
Electricity prices increase for about the first decade due to the carbon pollution price, but then begin to decline as low-carbon energy sources become increasingly cost-effective and widespread. Fossil fuel prices increase steadily as one would expect.
Most commodities see a linear increase in their prices relative to the baseline with the national level, linear increase in the rate. Electricity, on the other hand, can switch out of carbon-intensive coal and natural gas and into zero-carbon nuclear, wind, and solar, which reduces the impact in the 2020s and 2030s.
Compared to the baseline scenario without a carbon tax, low-carbon energy sources like wind and nuclear power become a much larger part of the power mix. Coal is anticipated to be phased-out entirely by 2025.
Electrical power generation mix without (left) and with (right) a revenue-neutral carbon tax.
The purpose of the carbon tax is achieved as well, with carbon dioxide pollution projected to decline 33% after only 10 years, and 52% after 20 years, relative to baseline emissions.
U.S. carbon dioxide emissions under a revenue-neutral carbon tax (yellow) and without a carbon tax (blue).
In a key side-benefit, because other air pollutant emissions are reduced as fossil fuels are phased out, the report projects that 13,000 premature deaths would be prevented annually after 10 years, with a cumulative 227,000 American lives saved over 20 years.
Okay, but how does this put pressure on anyone to change?
Seems like zero gain for a bunch of effort.
The point of a carbon price is to push consumer demand for change by increasing prices faster than resource scarcity does... This fails to deliver that.
The side benefit is to use revenue to encourage renewable energy adoption.... This fails to deliver that.
So why bother?
I see mentioned on occasion that the site is about the Science of AGW/ACC or whatever moniker you wish to use and yet from time to time an economic piece comes up in dealing with mitigation.
I completly disagree with the aproach of a CO2e emissions tax being anything but smoke and mirrors, ultimately futile and bad policy to persue (it doesn't even begin to consider embeded emissions fo example). Does anyone think the newly announced US reductions (tiny as they are) will still be in place if a GOP candidate becomes the POTUS ? I refer you to the Australian federal election outcome last year for some idea of what will happen if you don't drag the people along first. Just not sure if this site is the appropriate place for me to engage in those discussions if the constraints mentioned in the first paragraph are in place ?
It would be good to move the debate past bickering over the miutae of the science and into discussing mitigation (or not)
[PS] Your point is made but runs close to edge of politics. Please note our comments policy and make sure you comply
Dhugalf@1,
The cost of energy feeds into everything. A tax on CO2 emissions raises the cost of getting energy from fossil fuels relative to getting energy from other sources.
When electric companies need to increase or replace infrastructure, and they can predict a rising cost of fossil fuel use, why would that not affect their decision about what to build?
When consumers are buying goods, the goods produced with less fossil fuel will be cheaper than those produced with less. Why would people not choose to buy the less expensive goods?
Without the dividend, the government would get to choose which renewables to subsidize. Representatives from regions which have uranium will propose nuclear, those from windy regions will propose wind, and those from deserts will propose solar. Do you really trust politicians to choose the most cost effective combination?
Trevor, this article does move past the minutia of the science. Rest assured there will be resistance to any plan put forth by anyone.
There are three broad alternatives for mitigation: regulations, cap and trade, and carbon tax. Regulation and cap&trade place limits on production and would complicated to administer, and lead to energy price spikes during high energy demand years, and limited incentive to reduce CO2 production on low demand years. In contrast, a gradually increasing, revenue-neutral tax&rebate plan applies a constant and predictable pressure on the market.
OK, what's your plan?
dhugalf @1 - I don't follow your argument. As Chris G notes, a carbon tax will rise fossil fuel energy costs. Hence consumers will shift their purchasing decisions toward low-carbon alternatives. Those who fund and invest in energy projects won't put their money into technologies that are assured of becoming more expensive every year.
Trevor - same comment as me @5. I don't follow what you're saying.
As documented in a recent Time magazine article*, there is a growing green energy revolution already underway in the U.S. in the absence of either a ntional "cap and trade" system, or a national carbon tax. The belief that the imposition of either option will not accelerate what's already happening in the energy marketplace is a tad disingenuous in my opinion.
*The Green Revolution Is Here by Michael Grunwald, TIME, June 5, 2014
Nice article. On the theoretical side it does look possible to make an argument for a move to renewables, and lower carbon. No matter what is found in interviews, conservatives do not want more taxes and income re-distribution. Public opinion on the matter is very liable. Changing the underlying socio-political underpinnings of society, energy sources and infrastructure is hard and expensive. The driver is the absolute necessity of doing it. Clearly, it is better to have a happy outcome rather than a dismal one. We are in a pickle with respect to human population, resource use, and planetary governance.
My point is: Consumers are utterly unaffected by what the industry does, so why would they change any purchasing decision at all?
You are assuming consumers will change without any reason to do so (apart from philosophy). There will be no economic incentive for consumers to change anything - in fact you are rewarding them for staying on fossil fuels.
You're raising costs, but then paying them straight back to consumers.
You may as well do nothing at all, it will have the same result.
There is a missing link in this logic chain somewhere.
You're not collectng revenue to use for renewable energy, it's just cycling back to consumers....You're not making fossil fuel more expensive, you're giving consumers money to pay for the increase.
Why bother?
@dhugalf,
Our point is that consumers are very much affected by what industry does, in terms of costs of goods. Let's try again, goods which are produced with energy resulting is less CO2 production cost less to the consumer than goods produced with more. We do not expect consumers to change, but rather to continue to buy equivalent goods which cost less.
This is not a tax on energy; it is a tax on CO2 production. Burning fossil fuels produces CO2. Fossil fuel is taxed at the mine or port. Fossil fuel is more expensive; other forms of energy production are not more expensive.
The dividend aspect does two things: It prevents the growth of government through this system, and it protects the poor from rising costs.
dhugalf @9, when tomatoes get more expensive, I buy less tomatoes. It does not matter whether the tomatoes have become more expensive because of drought, flood, or an increased price on carbon. The effect is the same. In contrast, If I get an increase in income, I tend to buy more of everything. My increased purchases do not focus exclusively on those things which have increased most in price. The net effect of both an increase in the price of goods based on the carbon emissions from manufacture and transport of the goods coupled with an increase of income is that I buy less of the carbon intensive goods (though not as much less as if I had no increase in income), but more of the non-carbon intensive goods. Because I am not alone in this, the net effect will be that business investment will shift away from producing carbon intensive goods toward non-carbon intensive goods (which further increases the price of carbon intensive goods, and decreases that of non-carbon intensive goods). This effect multiplied across the 20 million people in Australia, or the 200 million in the US adds up to very a large effect.
If you think otherwise, by all means submit your proof that price signals do not effect demand to a journal of economics. Your noble prize awaits.
The more general reason that economic development will increase is that whenever a society or an individual sets an objective to achieve, it takes effort. In the case of a whole society, "effort" means more economic activity; we are doing stuff. Even destructive activity like war generates economic growth, at the cost of energy and the environmental impacts that has. However, if the "effort" generates good, like the space program, then all the effort generates good as well as economic growth. In this case, since the energy factor creates more efficient energy sources, and energy economizing, it is like the space program; good all around. Imagine if Pluvinergy was developed, it creats a whole new era. The benefit and ecomomic growth is litteraly unimaginable.
Nice summary of the complex mechanics though, it clears the head.
Tom C writes: "If you think otherwise, by all means submit your proof that price signals do not effect demand to a journal of economics. Your noble prize awaits.
Tom, this is only a generalized rule - not an absolute. It would require that all actors are rationale and have perfect information - which of course never happens in the real world. A brief look at mortgage rates over the last 10 years shows how tenuous the price/demand linkage can be.
This is because there are numerous other confounding factors; necessity, for instance. If the price of your heart medicine goes up it's more likely you will cut consumption of other products and *still* buy your medicine.
Often we do not have a choice in purchasing alternatives vis a vis carbon intensity. I have one only electricty provider, water provider, and garbage pickup provider. Anyone that wants these services is essentially a captive consumer.
Any accurate assessment of the effects would have to be on a sector by sector, industry by industry, product by product basis. There will be winners and losers - and the net economic effect is unclear to even advanced analysis.
"I have one only electricty provider"
I don't know where you live, but that however is not the case in many other places. Furthermore, if your electricity provider had a choice between a cheap or expensive generator, then chances are they buy cheap.
Everything you buy has embedded energy in it. A factory will choose the low cost provider and again, if carbon pricing mechanisms mean that non-carbon sources are cheaper, then that is what they will buy. If they dont, then they risk being uncut by a competitor that does use cheaper energy. If you put carbon-tax on imported goods unless there is cast-iron proof they were manufactured from non-carbon energy sources, then you put pressure on external manufacturers to find alternative energy. Personally I think it is a powerful way to encourage alternative energy investment. Of course, even better is simply a worldwide ban on new FF power plants. Let the market work to find the next best solution - means you have 30-40 years to replace FF.
Opposition to revenue-neutral carbon taxes seems to divide into two main rather contradictory arguments.
1) Demand for energy is inelastic and price increases won't change consumption or emissions.
2) A carbon tax will distort spending patterns so much that there will be economic disaster.
Of course there are levels of carbon tax that would be too low to make a significant difference and levels so high that, if introduced too quickly, would disrupt the economy unduly.
As Dana noted, what the experience of British Columbia shows is that a broad $30/tonne tax on combustion emissions can be introduced without economic disruption and can reduce emissions. The experience of BC also shows that introducing such a tax can be revenue-neutral and politically popular.
Of course, there are limits to how high such a tax can go without disrupting trade with neighbours that do not have such a tax. BC is also fortunate in having big hydroelectricity resources, which at least shielded consumers form higher utility bills as a result of the cabon tax.
ktonine @13, first, market mechanisms have clearly defined conditions under which they have limitted applicability or are likely to fail. Mortgage rates, for example, are prone to bubbles because they are lent against the assets of the borrower, including (especially) the value of the house being purchased. That value is itself, however, a function of the willingness of investors (normally banks) to extend credit, so that to a certain extent housing loans are lent against the willingness of banks to grant housing loans. This is a potential problem for any commodity with a futures market, and hence potentially for cap and trade schemes, and the reason why carbon credits unders such schemes should have a strict, and short time limit for their use (certainly less than 18 months, and ideally no longer than 3 months). It is definitely not a problem for carbon taxes, however.
There is more of a problem for potential near monopoly providers. I say near monopoly in that there are always alternative medicines (in one of your examples), means of obtaining power and water, or of disposing of garbage. You can, for instance, build a tank and truck in water, generate your own electricity, and dispose of your own rubbish (or regularly hire a skip).
These are expensive, or time consuming options in most cases, the consequence of which may be a low price elasticity of demand for certain products, including for near monopoly supply of essentials. Even then you can limit your payment of a related carbon tax by (in the case of electricity):
1) Using efficient appliances and lighting sources;
2) Lowering use of electricity by turning of unused lights, and appliances;
3) Reduce heating and cooling bills by insulating, and altering clothing states more in the house in response to changes in season.
That list is not exhaustive. There are similar means to reduce water consumption, and even waste generation.
The result is that a carbon price provides a consumer incentives to alter demand even in the face of monopoly supply (in addition to providing an incentive to the supplier to improve the carbon efficiency of suppply as discussed by scaddenp).
Further, while there are circumstances that mute the price signal of a carbon price, they are not universal. Consequently a carbon price still reduces carbon generation across the economy if not in particular sectors. (It will in all specific sectors as well, though not as much in some as in others. The ability to effectively reduce the carbon price where carbon efficiency is price inelastic, and increase it were it is price elastic is one of the key advantages of cap and trade over carbon taxes.)
Finally, some of the areas were carbon prices may be price inelastic (monopolly supply of electricity) can be made price elastic by suitable change of regulation. If the need to make a carbon tax more efficient provides an incentive for that change, that is an additional benefit from the carbon tax.
"There will be winners and losers - and the net economic effect is unclear to even advanced analysis."
Net economic effort of not mitigating emissions on the other hand is well studied and its mostly losers and especially to those with the least responsibility for causing the problem in the first place. People normally hot on freedom and responsibility seem strangely silent taking responsibility for effects on emissions. Lets not have paralysis by analysis.
@ktonine,
Tom, this is only a generalized rule...
Yes, we know that occasionally people do irrational things, but since it requires energy to produce and transport everything, we are talking about the general case. It does not require than all actors are well informed or rationale.
As far as one electric provider goes...What, you think electric companies never trade with other electric companies?
dhugalf wrote: "You're raising costs, but then paying them straight back to consumers."
It seems like your disconnect is that you are thinking that a zero net change for the entire population means zero net change for each individual. It does not.
If a 10% tax were added to the cost of coal based electricity and then all of that tax refunded back to the consumers the net change for all consumers would be 'zero' (though they would lose interest on the money between the time it was paid and refunded). However, an individual who used no coal based electricity would pay 0% of the tax, but still get their full share of the refund.
Under the proposed revenue neutral tax plan, those who do not reduce their emissions would lose money because they are paying more for the tax than they are getting back from the refund... the difference effectively becoming a wealth transfer to the people who do reduce their emissions. That's your economic incentive... the government is taking money away from people with high emissions lifestyles and giving that money to people with low emissions lifestyles. Thus, each individual has an economic incentive to reduce their emissions even though the government isn't making any money and the total population isn't losing any. It is the direction of transfer which creates the incentive.
In addition to rewarding those persons who choose to use less carbon energy, the proposal of increasing the tax or fee would make it clear that over time continuing to use a lot of carbon fuel would become increasingly expensive (unless fuel companies dropped their prices as consumers used less of their product, which would hurt their bottom line) and would cause people to find alternative energy sources, use it more efficiently, buy more efficient appliances , and insulate buildings better. Investors would shift away from fossil fuel companies and begin to invest in clean energy. This in turn would spur new companies and more money going into developing more efficient clean energy. The new study shows this will work.
It's alittle odd to me that Maryland and Delaware are categorized in the South Atlantic vs. the Mid-Atlantic. (West Virignia is also a bit questionable.) It probably wouldn't affect the graphs much in general, but I do wonder how the numbers would be impacted if that switch was made.
DAK4Blizzard @21, it turns out the classification of Maryland and Delaware as southern states is the standard convention as used by the US census bureau, with the regions marked as South Atlantic, East South Central, and West South Central combining to be classified as the Southern United States by the census bureau:
The division goes further back to the Mason-Dixon line which marked the difference between North and South at the north border of Maryland (but which excluded Delaware), and between slave states and non-slave states at the time of the civil war. Although Kentucky, Maryland and Delaware remained with the Union at that time, they were in fact slave states. Missouri (north of the line, but a slave state that joined the union) is not included in the south, so geographical cohesion is also a factor in the division.
Tom @22: I see, well at least it's based on something. I'm not a fan of the Bureau's defined Mid-Atlantic, at least not after the 19th century. It's weird to me that the Bureau has the Mid-Atlantic as subregion of the Northeast. But even considering that, I would still place MD and DE in there. Instead, we have the Bureau's definition conflicting a bit with this Wikipeida article's definition of the Mid-Atlantic. Oh well, thanks for the info.
Thanks CBDunkerson, that explains clearly what I was missing. :-)
So all we need is the ability to buy renewable energy from the grid that is cheaper than the fossil fuel alternative. And we need that ability to be widespread so industry can benefit and produce cheaper products. Or we need to produce our own energy that is cheaper than grid power... But to do that and not need the grid, you'd need to be able to deploy a lot of solar panels and a battery unit to keep things going all the time.
So this idea won't help very much right now, because neither option keeps the majority of households below fossil fuel prices.
Unless you can get people to put that new disposable income into crowd funding community renewable energy. Some would, most would just buy a bigger TV, car and beer. Probably until someone else built the renewable energy plants.
Well, at least its money funding the real economy instead of being hoarded.
Dana1981,
Three points for which I would like to see some clarification.
Thank you in advance.
DAK4Blizzard @23, it turns out there are a number of conventional divisions of the US that could have been used. Arbuably that used by the Bureau of Economic Analysis would be most suitable, but it turns out in their actual analyses the Bureau uses different divisions that do not correspond to state boundaries. Therefore their divisions are not particularly convenient, nor necessarilly appropriate.
dhugalf @24, CBDunkerson was not the only person to respond to you, and the responses by other people (including by me @11, with a follow on @ 16) clearly show why your response to CBDunkerson is ill informed. We can change our emissions be means other than just changing our electricity supplier. Further, electricity suppliers are in competition with each other and will gain in that competition by reducing their emissions in producing electricity. Your response merely shows the limit of your imagination in reducing your own emissions, and your inability to understand how pricing mechanisms work. Nothing more.
Terranova, answering your first two questions:
1) I have addressed the issue of cross-border shopping for gas in some detail on my own website. It is a factor in under-reporting fuel consumption in BC, but a small one. Furthermore, the carbon tax is just one reason why gasoline is more expensive and gasoline is just one reason why Canadians go shopping in the USA. See also this article by Yoram Bauman.
2) There are details about how the carbon tax is administered on the BC Government website. They say:
So, the incremental administration costs are small, because fuels were already taxed. Also, monitoring GHGs was already done at a national and provincial level because this is mandated by the UNFCCC rules that Canada has signed onto. Therefore, the carbon tax added no significant additional administrative burden there, either.
As for your last point, the health risks from fossil fuels, particularly respiratory problems resulting from coal are well known (for example) and, in any case, the 13,000 deaths per year number was in the Executive Summary of the report that Dana linked to.
dhugalf - I would agree that this is not enough access to alternative energy. To change this you have to create the conditions that will result in investment in alternative energy. You dont need crowdfunding etc. You just the need the appropriate market conditions to guarantee ROI.
For a long time I have thought that a revenue neutral carbon tax is the way to go. It could be sold as "The tax that is not a tax - you get it all back'.
We had a similar thing in Australia but they had no clue how to sell it and the Opposition (now in Government) intend to repeal it, having convinced the gullible in the electorate that any carbon price (including carbon cap and trade is a 'great big tax on everything'.
With a completely revenue neutral tax the accusations of 'picking winner to receive grant / loans' are neutralized (excuse the pun).
The modelling also shows a logical result of such a tax - people get cash in their pockets to spend, but they can reduce their emissions (energy consumption), saving money and are therefore better off.
At the same time there is stimulus to build new renewable generation, which is jobs intensive and reduces the balance of trade deficit because less fuel is imported. Wind and solar are already as cheap or cheaper than new coal or gas so don't need feed in tarriffs or RECs. But they catn compete with old coal / gas plants that were paid off years ago. So all that is needed is the C price so that old coal plants are not kept running but are closed sooner.
Simple really.
Thanks, Andy. I want to do some more research on the premature death subject.
Also, is the BC coal mining industry taxed? Apparently, it is a multi-billion dollar industry. Details can be found here.
Terranova@31
The BC carbon tax is applied to any combustion of coal within the province, but not to any coal mined in the province (or the US) that passes through the ports. Similarly, any oil or gas that is exported from BC is not taxed.
A significant exception to the taxing of fossil-fuel combustion is that on any flights from BC to outside the province, the jetfuel is not subject to the carbon tax. On flights within BC, the aviation fuel is subject to the tax.
I'm far from an expert on the direct health risks of fossil fuels, but I believe there is increasing evidence that particulates pose a bigger health risk than people used to think. WHO reports that there are about 3.3 million deaths per year from indoor air pollution (partly biofuels) and 2.6 million deaths estimated from outdoor air pollution (mostly fossil fuels) in SE Asia and the Western Pacific region (includes China).
But pollution deaths are not confined to developing countries. According to the OECD there are 40,000 deaths per year in France from vehicle diesel emissions alone. That's about ten times the number of deaths there from road accidents and the equivalent of the 9/11 deathtoll every month.
I posted this in a different thread, but haven't gotten a response, so thought I'd try here (and if I may add, I still think email notifications of thread activity are the way to go in keeping threads alive!):
I've been arguing about the success or lack thereof in another forum:
Climate Change - Impacts Part 2
The opposing argument against the info I posted from SkS are as follows:
1) while BC is keeping pace with the rest of Canada, it was doing better before 2008:
BC Carbon Tax Damage
2) it's unlikely that a few cents' tax had such a dramatic effect on consumption:
BC's carbon tax has had little effect on fuel consumption
3) in 2014, gas consumption in BC is back up to where it was in 2008:
No B.C. carbon tax miracle on 120th St.
I'm not posting any of this because I oppose carbon pricing; I definitely favor it. But I do like to be honest about what the evidence is and what inferences can be made. Can anyone help me defend the BC tax against these critiques?
PS - when I say "the success or lack thereof" in the previous post, I mean, of BC's carbon tax.
davytw @34, your first reference seems to be employing that famous fallacy of argument, "post hoc, ergo propter something else intirely". Specifically, looking at the chart they produce as evidence, the largest perturbation of the BC economy in 2008 was the global financial crisis. To totally ignore that as a potentially relevant factor shows that it is indeed an article for The American [non]Thinker.
More troubling is the way the American [non]Thinker ignore the pattern clear in the first graph, of a rise from near Canadian average growth in 2003 and prior, to a peak in 2005 with a clear decline thereafter. That is, they ignore the evidence that the decline back to the Canadian average growth preceded the introduction of the carbon tax, and indeed was the consequence of a brief spurt in growth followed by a return to Canadian average growth. It would be interesting to know what happened in 2003 to cause that spurt in growth. It would also be interesting to know Canadian and BC population growth statistics where so different in the five years prior to 2008 (as evidenced by the different pattern in real GDP growth (first graph) and real per capita GDP growth (second graph), but clearly neither pattern is related to the carbon tax (unless the American [non]Thinker also claims to have discovered backward causation in time).
Thank you, Tom. Unfortunately I think the same point can be made regarding the decline in gas consumption itself (see #2 above).
And #3 above is to me the kicker, in any case. If gas consumption is back up, it suggests that people have just shrugged their shoulders and adapted to the new price regime.
Ps: update-
Maybe I’m just doing a shitty job of Googling, but I can’t confirm the Business Insider’s chart showing that gas use in BC is up to 2008 levels. Here’s what I’m able to find:
http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/trade37c-eng.htm
dvaytw @37, from this site, it is possible to modify the display to include any or all Canadian territories, and years from 1993 to 2013. I used data from 2000 to get some idea of trends prior to the introduction of the carbon tax, and calculated Canadian minus British Columbia values, and Gross Gasoline Plus Diesel values as follows:
Geography Type of fuel sales 2000-2008 2008-2013 2000-2013 2013 minus 2007 % 2013 minus 2008 %
Canada Net sales of gasoline 363537 400668 328902 1814450 4.58% 2301072 4.63%
Gross sales of gasoline 315306 447665 327742 2054012 5.03% 2406471 5.07%
Net sales of diesel oil 535633 329527 355423 764290 4.46% 1342436 4.62%
Gasoline+Diesel 850939 777192 683165 2818302 4.86% 3748907 4.94%
Net sales of liquefied petroleum gas 1 -17970 9988 -9210 -1388 -0.44% 49759 -0.53%
British Columbia Net sales of gasoline 8405 -35361 -4135 -217599 -4.78% -130448 -4.87%
Gross sales of gasoline 5169 -12609 -3508 -244971 -5.16% -115020 -5.30%
Net sales of diesel oil 59123 82328 53829 348905 19.42% 431485 20.36%
Gasoline+Diesel 64293 69719 50321 103934 1.59% 316465 1.64%
Net sales of liquefied petroleum gas 1 0 0 0 0 #DIV/0! 0 #DIV/0!
Net sales of gasoline 355132 436028 333037 2032049 5.79% 2431520 5.86%
Gross sales of gasoline 310137 460274 331250 2298983 6.37% 2521491 6.41%
Net sales of diesel oil 476510 247199 301594 415385 2.71% 910951 2.80%
Gasoline+Diesel 786647 707473 632844 2714368 5.28% 3432442 5.35%
Can-BC Net sales of liquefied petroleum gas 1 -17970 9988 -9210 -1388 -0.44% 49759 -0.53%
Due to formating problems, that is not entirely easy to read, so here are the percentage values of 2013 minus year for gross petroleum (first table) and petroleum plus diesel (second table):
2013 values relative to
Gross Gasoline 2007 2008
Can-BC 6.37% 6.41%
BC -5.16% -5.30%
2013 values relative to
Gas+Diesel 2007 2008
Can-BC 5.28% 5.35%
BC 1.59% 1.64%
Quite clearly, considering gasoline alone there has been an 11% turnaround in BC due primarilly to the carbon tax. That is more than compensated for by increased diesel sales of approximately 20% relative to 2007/8 levels. Hower, combined gasoline/diesel figures still show that BC has limited the increase in fuel consumption relative to the rest of Canada, with a reduction of about 3.5% relative to rest of Canada figures.
These figures are gross figures. From 2007(2008) to 2013, British Columbia's population increased by 6.8% (5.36%). All else being equal we would have expected a similar increase in petrol and diesel usage. Ergo BC has kept road fuel usage significantly below population growth levels. At the same time there has been a significant increase in GDP, which (all else being equal) would be matched by an equivalent increase in fuel usage:
2007 2008
Can 8.92% 7.65%
BC 9.21% 8.00%
Based on GDP, the carbon tax has held road transport fuel use at 6% below expected growth based on economic growth alone. (And please note that BC still out performed Canada in GDP growth over the period, though I make no claims on statistical significance.)
In considering the data above, it should be noted that the articles you refer to discuss only gasoline sales, not gasoline plus diesel. That is appropriate in that the study they criticize also only discussed gasoline sales. Given this, it is astonishing to compare the data values for Gross Gasoline sales for BC with the chart from the Financial Post:
First the data (from 2006-2013):
4719356 4749604 4619653 4646008 4715626 4741085 4682115 4504633
Then the chart:
You will notice that where the chart has gasoline sales increasing sharply from 2011 to 2013, the statcan data shows it sharply decreasing. It also decreases over that period for Gasoline plus Diesel, so this is not a case of using combined data instead of the gasoline only data.
Second, all your sources make the argument that petrol use is price inelastic. That is only true in the short term. In the long term consumers react to increased fuel prices by buying smaller engined, more fuel efficient vehicles, or making more use of public transport. Ergo for a long term price signal, known in advance (such as the carbon tax), we would expect a definite price signal. This is something any competent economist should know.
Finally, for a proper review of British Columbia's carbon tax, may I suggest Murray and Rivers, 2015.
Thank you, Tom. Just from the tables I posted above, I was already getting the sense that the BI chart had serious issues. How can that guy get away with publishing that... it appears to be a blatant fabrication.
As far as the Murray and Rivers article, great stuff. It's clear from this though (among other things) that the collective action problem renders such measures much less effective than they otherwise could be.
There seems to be some momentum going now, parly thanks probably to clear indicators of current AGW impacts and a very obvious end to the so-called Pause (not that there ever was such a pause, but the average person needs to see it reflected clearly in the year-to-year surface temperature charts, apparently). Let's hope it carries through to a real effect in Paris.