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UBC Theses and Dissertations

Making carbon price as an effective signal Lee, Eun Hye


Carbon pricing is a rapidly spreading policy to mitigate GHG emissions. However, the current carbon price is not high enough to make an effective price signal. This study assesses the carbon tax policies in Sweden, British Columbia, and France as examples of high carbon tax rates. This work expands the scope of the carbon price impact incorporating explicit and implicit sources, focusing on a carbon tax and a fuel tax. The carbon prices are calculated by fuel types and weighted by their share in the Total Primary Energy Supply (TPES). A quantitative analysis shows that implicit fuel taxes mainly drive the carbon price signals, and the carbon pricing is skewed towards vehicle fuels, such as gasoline and diesel. The research considers the emission coverage of the carbon tax, an increasing price trajectory, and revenue management. The policy designs are all diverse in the three cases. Lessons are drawn from their experiences regarding allowing exemptions, expanding emission coverage by the carbon tax, setting an increasing price trajectory, and effectively managing revenue. In the beginning, it seems easier to allow exemptions to the sensitive industries and then to expand the emission coverage after allowing enough time for those industries to adjust. Increasing price trajectory is an essential quality for a sustainable carbon tax. In addition, revenue neutrality is not a must-have condition for successful carbon taxation. However, it is an undoubtedly effective strategy to persuade the public, framing the carbon tax as a tax shift, not as a tax increase. These findings point out the skewed carbon price signals even in jurisdictions with high carbon taxes. It suggests that more efforts need to be made to expand the carbon price signal, especially for the non-vehicle fuels and sectors. It can be suggested that policy makers who are considering implementing a new carbon tax or revising the current carbon tax policy need to consider the carbon price from implicit sources, such as fuel taxes, to have a comprehensive picture. Moreover, jurisdiction-specific contexts need to be carefully considered to make the tax policy a sustainable measure to combat climate change.

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