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The Impact of a Revenue-Neutral Carbon Tax on GDP Dynamics: The Case of British Columbia

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  • Jean-Thomas Bernard
  • Maral Kichian

Abstract

We study the impact over time of revenue-neutral-designed carbon taxes on GDP in the Canadian province of British Columbia (B.C.). The tax is broad-based, and all rate hikes and their timings were pre-announced. Our time series approach accounts for these pre-announcement effects, as well as for the possible saliency of the tax. Estimated impulse response functions and statistical comparisons of GDP dynamics in the presence and (counterfactual) absence of carbon taxes lead to the same result. Overall, revenue-neutral carbon taxation has no significant negative impacts on GDP. Our setup also allows us to examine the extent of the carbon tax pass-through into energy prices. We find that pass-through is complete. We conclude that implementing revenue-neutral carbon taxation contributes to lowering harmful greenhouse gases into the atmosphere without hurting the economy.

Suggested Citation

  • Jean-Thomas Bernard & Maral Kichian, 2021. "The Impact of a Revenue-Neutral Carbon Tax on GDP Dynamics: The Case of British Columbia," The Energy Journal, , vol. 42(3), pages 205-224, May.
    • Handle: RePEc:sae:enejou:v:42:y:2021:i:3:p:205-224
    DOI: 10.5547/01956574.42.3.jber
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    References listed on IDEAS

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    Citations

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    Cited by:

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    2. Zhao, Xiaolei, 2025. "Carbon pricing policies trade-offs between environment and economics," Applied Energy, Elsevier, vol. 401(PC).
    3. Oscar Jaulin & Andrey Ramos, 2025. "Becoming Green: Decomposing the Macroeconomic Effects of Green Technology News Shocks," Papers 2507.18386, arXiv.org.
    4. Diego R. Känzig & Maximilian Konradt, 2024. "Climate Policy and the Economy: Evidence from Europe’s Carbon Pricing Initiatives," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 72(3), pages 1081-1124, September.
    5. Morão, Hugo, 2024. "The impact of carbon policy news on the national energy industry," Energy Economics, Elsevier, vol. 134(C).
    6. Hamidoğlu, Ali & Wang, Yuhao & Wang, Hao, 2025. "Transforming energy taxation policy: A dual cooperative game and stochastic frontier approach for sustainable transitions in Canada," Energy, Elsevier, vol. 337(C).
    7. Jingyi Guo & Ling Wang, 2024. "Spatiotemporal Variations in Gross Ecosystem Product and Its Relationship with Economic Growth in Ecologically Vulnerable Watershed Areas: A Case Study of Yongding River Basin," Sustainability, MDPI, vol. 16(21), pages 1-20, October.
    8. Hensel, Jannik & Mangiante, Giacomo & Moretti, Luca, 2024. "Carbon pricing and inflation expectations: Evidence from France," Journal of Monetary Economics, Elsevier, vol. 147(C).
    9. Albert, Juan-Francisco & Gómez-Fernández, Nerea & Boto-García, David, 2025. "Up in the air: How do carbon policy shocks affect air travel?," Transport Policy, Elsevier, vol. 168(C), pages 54-68.
    10. Mangiante, Giacomo, 2024. "The geographic effects of carbon pricing," European Economic Review, Elsevier, vol. 168(C).

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