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B.C.'s carbon tax caused drop in gas demand: draft study

B.C.'s carbon tax caused a drop in gasoline consumption nearly five times higher than what identical market fluctuations alone could have caused, according to the findings in a new and unpublished study.

The draft paper, authored by University of Ottawa environmental economists Nicholas Rivers and Brandon Schaufele, has been submitted the B.C. Ministry of Finance for consideration as part of its ongoing carbon tax review.

"If you actually go and look at the way that people respond to prices in the real world you find that there are these anomalies, and that people do actually respond to prices changes due to taxes quite differently than they respond to price changes due to just any idiosyncratic reason," Rivers told Metro on Tuesday.

"...We're thinking it was kind of a flag that was raised to say 'The price of gasoline is going up, you should think about changing your behaviour.'"

The researchers used statistical models to control for other potential explanatory variables, such as increases in household incomes, the recession, and changes in the energy efficiency in the vehicle stock.

Comparing Stats Canada data going back to 1990, Rivers and Schaufele produced a model that found a five cent increase in the carbon tax generated a 10.6 per cent short-run reduction in gasoline demand, while a five cent increase due to market volatility only produced a 2.2 per cent lag in consumption.

The study says the carbon pricing policy reduced emissions by more than three million tonnes, of which 79.1 per cent "would not have been achieved if individuals responded to carbon taxes in the same way as to identical changes in gasoline prices caused by other factors."

He emphasized that the paper's causal hypothesis is purely speculative at this point, and that the models used are still subject to peer review.

Jordan Bateman, director of the B.C. branch, of the Canadian Taxpayers Federation, suggested Monday to Metro that a reactionary jump in cross-border gas shopping could account for the drop in demand at the pump.

But Rivers said there is insufficient evidence of that, since cross-border shopping was around long before the tax's introduction in 2008, and not enough British Columbians live close enough to the border for their choices to explain the difference.

Another study published in June by the same university found that B.C.'s petroleum fuel consumption per person dropped by 15.1 per cent from 2008 to 2011, while it only dropped by 1.3 per cent in the rest of the country during that period.

Rivers said he is currently collecting feedback from experts and expects to submit the paper to a journal for a blind peer review within a couple of months.

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