1994 study on the distributional effects of a Canadian Carbon Tax

Back, back, to the distant first rumblings of interest in carbon taxes...or maybe not that far back. Once the Rio Convention was signed back in 1992, many countries started looking at carbon taxes as one option for controlling greenhouse gas emissions. This article ("Simulating the Distributional Effects of a Canadian Carbon Tax" describes one of Canada's early modelling attempts, done by Statistics Canada.
The model looked at a tax on the carbon content of fossil fuels, administered at the production level, and aimed at stabilizing Canadian emissions at the 1990 level by the year 2000 (this was the original Rio goal). The basic conclusions: a) the tax level would have to be set at 101.56$/tonne of carbon content in the fuel (note, not per tonne of CO2e) b)this would affect GDP by somewhere around 1-2% c)the tax would be modestly regressive. Low-income earners would lose on average 3.4% (up to 7% in some sub-groups) of consumable income, while the highest-income earners would lose only 1.9-2.2%.

Link to the study

My comments: Not too much to say on the modelling, which was beyond me technically I have to admit. What I found most interesting was the authors preamble on carbon tax theory. They were very clear in saying that carbon taxes were the most efficient form of regulation available for reducing greenhouse gas emissions, and that political acceptance was the only real obstacle in implementing them. Aside from that, this article in my mind simply supports the ideas that a carbon tax would have minimal impact on economic growth, but that distributional effects would have to be compensated for.