Evaluating carbon tax policy: A methodological reassessment of a natural experiment

Heralded as the grand experiment in carbon tax policy, the Canadian province of British Columbia was on the forefront of North American environmental policy when it implemented a carbon tax in 2008. Despite being well-lauded in the literature, new data suggests that CO2 emissions and fossil fuel consumption have in fact risen in recent years. We test the effectiveness of the policy change using a synthetic control analysis and find that, contrary to the theoretical intuition about carbon taxation, CO2 emissions and gasoline consumption rose in British Columbia relative to the synthetic control. However, we do find there to be a reduced share of economic activity in the energy industry following the policy change. •This study examines the long-run effectiveness of British Columbia’s carbon tax.•The synthetic control methodology is adopted to produce a counterfactual.•Emissions and gas consumption do not fall relative to the synthetic control.•The share of employment in energy declines after the policy change.