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Carbon Tax Salience and Gasoline Demand

Nicholas Rivers and Brandon Schaufele ()

No 1211E, Working Papers from University of Ottawa, Department of Economics

Abstract: We demonstrate that the carbon tax imposed by the Canadian province of British Columbia, a unique carbon pricing policy that comprehensively applies to all fossil fuels, 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 including intuitively plausible and strong instrumental variables. Along with calculating the reduction in carbon dioxide emissions attributable to the tax, we discuss potential explanations for the differential consumer responses to the carbon tax relative to the marketdetermined price.

Keywords: Carbon tax; tax salience; instrumental variables; environmental pricing; gasoline demand. (search for similar items in EconPapers)
JEL-codes: C26 H23 H29 Q41 Q58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env, nep-res and nep-tre
Date: 2012
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