Estimating the Causal Impact of British Columbia Carbon Tax: A Synthetic Control Approach

This study analyzes the causal effects of British Columbia's carbon tax on both per capita residential natural gas consumption and per capita residential CO2 emissions. Utilizing province and state-level data from 1990 to 2019 and employing the synthetic control method, we found that the implementation of the carbon tax led to a significant reduction in BC's per capita residential natural gas consumption. On average, this reduction amounts to 50.99 m(3) annually, representing a 12% decrease. Furthermore, the per capita residential CO2 emissions exhibit an average annual decrease of 0.09 metric tons per capita, equivalent to a 10% reduction when compared to states without a similar policy in place. These findings suggest that market-based environmental quality mechanisms, such as the carbon tax, can effectively contribute to the reduction of greenhouse gas emissions.