Sileci, Lorenzo (2023) Carbon pricing with regressive co-benefits: evidence from British Columbia’s carbon tax. Grantham Research Institute on Climate Change and the Environment Working Paper (405). Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science, London, UK.
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Abstract
I assess the air quality and environmental equity impacts of the 2008 carbon tax in British Columbia. Using high-resolution data and a synthetic difference-in-differences strategy, I find that the carbon tax has reduced PM2.5 emissions by 5.2-10.9%. This result is heterogeneously distributed, with larger reductions in areas with lower baseline pollution, lower population density, lower material deprivation, and higher income. While all areas experience substantial positive co-benefits in terms of reduced air pollution hazard rates, quantified at $198 per capita, my results imply a widening of the pre-existing environmental justice gaps. This dynamic represents an additional dimension of carbon tax regressiveness.
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