Nicholas Rivers

Salience of Carbon Taxes in the Gasoline Market

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.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.

Taxing Emissions, Not Income: How to Moderate the Regional Impact of Federal Environment Policy

Canadian policymakers have the policy tools needed to ameliorate the regional economic harm that taxing GHG emissions can cause. A price on GHG emissions will affect Canadian provinces differently, possibly undermining support for a policy that incurs regional transfers of income. The authors recommend returning to the provinces the revenues collected through auctioned emissions permits, so that they may offer personal and corporate income tax relief, all to moderate the regional impact of GHG carbon policy. Allowing provinces to retain the revenues collected from auctioned emissions permits would achieve a greater degree of regional equity than the other policy options.

Canada's efforts towards greenhouse gas emission reduction: a case study on the limits of voluntary action and subsidies

Canada has committed internationally to several agreements to limit climate change, most recently by ratifying the Kyoto Protocol in 2002. However, its domestic climate change policy is not reflective of these international commitments. In particular, federal government climate change policy over the last decade has emphasised noncompulsory policies such as voluntarism, information provision, and modest subsidies. These policies are designed primarily to engender minimal political resistance, and have been relatively ineffective in providing the incentives and regulatory structure for the dramatic technological and behavioural change required for significant greenhouse gas emissions reductions. Without a major change in direction towards more compulsory policies, it seems unlikely that Canada will achieve significant domestic greenhouse gas reductions over and beyond the Kyoto Protocol time frame. We suggest a more compulsory policy approach dominated by market-oriented regulations. When designed appropriately, this type of policy stimulates the development and commercialisation of new technologies without dramatically affecting prices of energy or goods.

Using Nudges to Reduce Waste? The Case of Toronto's Plastic Bag Levy

The overuse of disposable plastic bags is a major environmental problem across the globe. In recent years, numerous jurisdictions have sought to curb disposable bag use by implementing a levy or fee at the point of purchase. These levies are typically small and symbolic (around

Sharing the Burden for Climate Change Mitigation in the Canadian Federation

0.05 per bag), but serve as a highly-visible and continuous reminder to consumers. As such, they are consistent with nudging policies that seek to encourage broad changes in behaviour through small, non-coercive measures that influence peoples thinking about an issue. While existing empirical evidence suggests that nudges are highly effective in reducing disposable bag use, we argue that many of these studies are flawed because they lack adequate temporal and geographic controls. We use longitudinal data from four waves of a major Canadian survey to analyze the effect of a disposable bag levy in the City of Toronto. Controlling for demographics and changes in social norms over time, we find that the levy increased the use of reusable shopping bags by 3.4 percentage points. Moreover, we find that the impact of the policy was highly variable across behavioural and demographic groups. The levy was highly effective in encouraging people who already used reusable bags to use them more frequently, while having no effect on infrequent users. We also find that the effects are limited to households with high socio-economic status (as measured by income, educational attainment, and housing situation). This suggests important limitations for nudging policy more generally, as people with lower socio-economic status appear to have been unaffected by this behavioural prompt.

The Effect of Carbon Taxes on Agricultural Trade

Dividing the burden for greenhouse gas abatement among the provinces has proven challenging in Canada and contributes to Canadas failure to limit emissions. This paper uses a computable general equilibrium model to compare a number of rules for sharing the burden of emission reductions among Canadian provinces. Because of the substantial heterogeneity among Canadian provinces, these different rules imply significantly different relative abatement effort among provinces, and also significantly different welfare implications. We compare these archetypal burden sharing rules to existing provincial emission reduction commitments and find that none of the standard burden sharing rules comes close to existing commitments.

Intensity-Based Climate Change Policies in Canada

This study evaluates the implications of an actual carbon tax on the international competitiveness of the agricultural sector. Applying uniformly to all fossil fuels combusted within its borders, the province of British Columbia unilaterally introduced a carbon tax on July 1, 2008. Using commodity-specific trade flows and exploiting cross-provincial and inter-temporal variation, we find little evidence that the implementation of the carbon tax is associated with any meaningful effects on agricultural exports despite the sector being singled out as “at risk” by the provincial government. Allowing for heterogeneous responses by commodity, some statistically insignificant negative effects are shown for specific exports. Discussion of potential policy remedies to address the potential impacts of the tax on firm profitability and international competitiveness is also included.

New Vehicle Feebates

Pour réduire les émissions de gaz à effet de serre (GES) des grandes industries, le gouvernement canadien propose d’adopter une approche utilisant une norme standard de rendement d’émissions négociables ; dans un tel cas, c’est l’intensité des émissions, plutôt que leur niveau absolu, qui est réglementée. À la différence du système de plafonnement et d’échange, ce type d’approche ne garantit pas un niveau global de réduction des émissions, et c’est ce qui a entraîné beaucoup de critiques. Toutefois, étant donné la dynamique des normes de rendement, cette approche peut permettre d’amoindrir la baisse de compétitivité internationale d’un pays qui adopte, en matière de GES, des politiques plus fermes que certains de ses partenaires commerciaux. De plus, la norme standard de rendement peut s’ajuster plus efficacement à des mesures fiscales existantes et ainsi produire un impact économique global moins important qu’un système de plafonnement et d’échange. Dans cet article, en ayant recours à un modèle dynamique d’équilibre général appliqué au Canada, nous considérons les arguments théoriques qui militent pour ou contre la norme standard de rendement intégrale, et nous comparons celle-ci au système de plafonnement et d’échange.

Free-Riding on Energy Efficiency Subsidies: The Case of Natural Gas Furnaces in Canada

New vehicle feebate programs encourage improved fleet-wide vehicle fuel efficiency; yet analyses of these policies have been limited to ad hoc proposals. In this paper, we exploit an extensive, multi-year dataset which includes more than 16 million observations to evaluate the welfare implications of a long-standing vehicle feebate program in the Canadian province of Ontario. We: (1) show that second-best optimal feebates can be written as a function of new vehicle Pigouvian taxes; (2) find that Ontarios feebate program was welfare-enhancing relative to a no feebate scenario but that a second-best optimal benchmark would have yielded additional welfare while reducing fleet-wide emissions; and (3) find that Ontarian consumers responded asymmetrically to fees versus rebates.

The Case for a Carbon Tax in Canada

We assess the extent to which subsidies for home energy efficiency improvements in Canada have been paid to households that would have undertaken the improvements anyway - the so-called free rider rate. We focus on forced-air natural gas furnaces, replaced between April 1, 2007 and March 31, 2011, under both federal and provincial subsidy programs as well as the 2009 federal Home Renovation Tax Credit. Our results indicate that around 50 percent of expenditures under the Canadian subsidy and tax credit programs represented free riding. In the long run, our estimates suggest that over 80 percent of grant recipients would have chosen an identical furnace at the time of replacement. We estimate that the cost effectiveness of the programs in terms of greenhouse gas reduced was between