Firm responses to a carbon price: corporate decision making under British Columbia's carbon tax

Abstract

Top-down economic approaches theoretically show that placing a price on carbon can reduce emissions. Responses by firms to these policies, however, are less well understood and are critical for understanding the effectiveness of price-based carbon policy. This article provides an analysis of firm-level responses to the carbon tax in British Columbia (BC) through empirical research of grey literature, industry participation, and interviews with executives of major emitting firms in BC. The article highlights the empirical responses to the tax by firms, who experience difficulty in making low-carbon changes in response to fluctuating commodity prices, the low certainty of climate policy over temporal and spatial scales, and the political economy of implementing regional climate policy. It also highlights the importance of understanding firm-level responses as a complementary approach to macro-economic policy making on carbon pricing. The article shows the importance of engaging decision makers in corporations to understand how carbon is governed in light of emerging climate policy. Policy relevanceThis article is relevant to policy makers implementing carbon-pricing initiatives by illustrating the need to complement macroeconomic models with firm-level response analysis. It also demonstrates the key concerns of executives in a resource extractive economy and the ability of a carbon price, and the need for complementary technology funds and policy, to affect change in industrial emissions.

Corporate Climate Policy-planning in the Global Polity: A Network Analysis

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Do carbon abatement opportunities become less profitable over time? A global firm-level perspective using CDP data

“…In order to assess whether firms are responding to policy measures in the manner intended, it is important to observe what firms actually do, as Bumpus (2015) and Brännlund et al (2014) also argue. If firms' responses are different than expected, that could be an indication that the price of carbon is too high or too low, which could point to the need to adjust the tax or number of allowances.…”

“…This means that policy-makers are not only faced with the challenge of determining an optimal carbon price, but with determining a globally efficient time path for carbon prices (Aldy et al 2010). To assess whether policy-makers are achieving their objectives, it is therefore imperative to observe how firms respond, as Brännlund et al (2014) and Bumpus (2015) also argue. By using firm-level data on what opportunities firms choose to implement, policy-makers can get additional insight on whether they are achieving their carbon reduction goals, and whether their policies are having unintended consequences for aggregate costs, competitiveness, or other dimensions that Stavins (2019) considers.…”

Climate finance justice: International perspectives on climate policy, social justice, and capital

“…Climate justice-based arguments for climate finance typically draw on the twin principles of historical responsibility for climate change and of the greater capacity to act (Sayegh 2019). As part of the neoliberal turn toward environmental management, the Global North's increasing use of climate finance has included a reliance on markets and economic modelling, such as carbon taxes (Bumpus 2015), insurance (Johnson 2013), carbon offsets (Bumpus and Liverman 2008), payments for ecosystem services (McAfee and Shapiro 2010), cap and trade (Klinsky 2013), adaptation funds (Grasso 2009), and loss and damage compensation (Roberts and Huq 2015). But does this deployment of finance undermine other climate justice goals?…”