British Columbia's revenue-neutral carbon tax

Among the unique elements of the BC carbon tax is its goal of revenue-neutrality, meaning that all revenues raised by the tax are to be recycled to BC households and businesses, largely in the form of tax cuts. [...] This paper seeks to do that by drawing from the small but 1 Fifteen years later, Stavins and Richard Schmalensee revisited the grand policy experiment in the pages of the same journal, highlighting what they referred to as an “ironic” history of the policy, including policy design choices that “worked” despite their flaws, rejection of emissions trading by some of the political constituencies that [...] In addition, the paper reviews the studies that have estimated the effect of the tax on British Columbia’s emissions profile and synthesizes the research on the tax’s economic effects, exploring whether the tax has impeded or enhanced economic growth, given theoretical priors that it could go either way with judicious recycling of the revenues. [...] The paper concludes with an exploration of the distributional consequences of these economic effects across the BC population, a review of the evidence on public acceptance of the tax, and a summary of findings. [...] Some observers viewed the 2009 provincial election as a referendum on the BC carbon tax, and the opposition party called for its abolition as part of an “Axe the Tax” campaign.2 However, the state of the economy in the midst of the global recession was foremost in voters’ minds, and voters viewed the ruling party more favorably than the opposition on economic issues (Harrison 2013).