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The Effect of Carbon Tax on Farm Income: Evidence from a Canadian Province

  • Edward Olale
  • Emmanuel K. YiridoeEmail author
  • Thomas O. Ochuodho
  • Van Lantz
Article

Abstract

British Columbia (BC) introduced North America’s first carbon tax in 2008. An analysis of the impact of the BC carbon tax is of interest to various stakeholders in the jurisdiction where the tax was implemented. Other Canadian provinces and other countries contemplating a carbon tax policy are looking for insights on how to optimize potential positive and negative consequences. Given that government agri-environmental policies often emphasize farm-level support and environmental performance, there is interest in understanding the farm-level impacts of the carbon tax. The effect of the BC carbon tax on farm income and related production cost variables is investigated. Panel data from 2000 to 2015 are analyzed using both tabular and econometric approaches of the difference-in-difference method. The results indicate that the carbon tax is associated with a decline in net farm income-to-receipts ratios ranging between 8 and 12 cents per dollar of farm receipts. The analysis for costs-to-receipts ratios suggest that the carbon tax is directly related to higher commercial feed costs, farm labour costs, interest costs, and depreciation costs. Results of the regression analysis indicate that all the carbon tax effects are highly statistically significant. These findings can inform policy discussions about carbon tax effects on farmers.

Keywords

Carbon tax Farm-level impacts Profitability British Columbia 

JEL Classification

C54 Q10 Q50 

Notes

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Copyright information

© Springer Nature B.V. 2019

Authors and Affiliations

  • Edward Olale
    • 1
  • Emmanuel K. Yiridoe
    • 2
    Email author
  • Thomas O. Ochuodho
    • 3
  • Van Lantz
    • 4
  1. 1.Department of EconomicsUniversity of New BrunswickFrederictonCanada
  2. 2.Department of Business and Social Sciences, Faculty of AgricultureDalhousie UniversityTruroCanada
  3. 3.Department of Forestry and Natural Resources, College of Agriculture, Food and EnvironmentUniversity of KentuckyLexingtonUSA
  4. 4.Department of Economics, and Faculty of Forestry and Environmental ManagementUniversity of New BrunswickFrederictonCanada

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