Salience of carbon taxes in the gasoline market |
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| Institution: | 1. Graduate School of Public and International Affairs and Institute of the Environment, University of Ottawa, 55 Laurier Avenue East, Ottawa, ON, Canada K1N 6N5;2. Ivey School of Business, University of Western Ontario, 1255 Western Road, London, ON, Canada N6G 0N1;1. Department of Economics and Statistics, University of Siena (I), Italy;2. Florence School of Regulation – Climate, European University Institute, Italy;1. University of Neuchâtel, Department of Economics and Business, A.-L. Breguet 2, CH-2000 Neuchâtel, Switzerland;2. Boston Consulting Group, Geneva, Switzerland;3. Newcastle University, School of Agriculture, Food and Rural Development, UK;4. Graduate Institute of International and Development Studies, Centre for International Environmental Studies, Switzerland |
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| Abstract: | We demonstrate that the carbon tax imposed by the Canadian province of British Columbia caused a decline in short-run gasoline demand that is significantly greater than would be expected from an equivalent increase in the market price of gasoline. That the carbon tax is more salient, or yields a larger change in demand than equivalent market price movements, is robust to a range of specifications. As a result of the large consumer response to the tax, we calculate that during its first four years, the tax reduced carbon dioxide emissions from gasoline consumption by 2.4 million tonnes. |
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| Keywords: | Carbon tax Tax salience Environmental pricing Gasoline demand |
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