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Carbon Tax and Revenue Recycling: Impacts on Households in British Columbia

Marisa Beck, Nicholas Rivers, Randall Wigle, Hidemichi Yonezawa ()
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Marisa Beck, Nicholas Rivers, Randall Wigle, Hidemichi Yonezawa: Wilfrid Laurier University,

Authors registered in the RePEc Author Service: Hidemichi Yonezawa, Nicholas Rivers and Randall M. Wigle

LCERPA Working Papers from Laurier Centre for Economic Research and Policy Analysis

Abstract: This study investigates the distributional implications of the revenue-neutral carbon tax policy in British Columbia. We use a computable general equilibrium (CGE) model of the Canadian economy and disaggregate households into deciles by annual income using data from a large household expenditure survey. Using the model, we find that the existing BC carbon tax is highly progressive even prior to consideration of the revenue recycling scheme, such that the negative impact of the carbon tax on households with below-median income are smaller than that on households with above-median income. We show that our finding is a result of welfare effects of a carbon tax being determined primarily by the source of a households' income rather than by the destination of its expenditures. Finally, we show that the existing revenue recycling scheme is also progressive. Overall, the tax appears to be highly progressive.

Keywords: carbon taxes; distributional effects; British Columbia; computable general equilibrium analysis (search for similar items in EconPapers)
JEL-codes: D63 Q48 Q54 (search for similar items in EconPapers)
Date: 2014-09-07, Revised 2014-09-07
New Economics Papers: this item is included in nep-cmp, nep-ene, nep-env and nep-pbe
Note: LCERPA Working Paper No. 2014-15.
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Citations: View citations in EconPapers (4)

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Journal Article: Carbon tax and revenue recycling: Impacts on households in British Columbia (2015) Downloads
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