Salience of carbon taxes in the gasoline market

• We evaluate the effect of North America’s first broad-based carbon tax on gasoline demand.
• We illustrate that the carbon tax yielded a larger change in gasoline demand than equivalent market price changes.
• During its first four years, the carbon tax reduced carbon dioxide emissions from gasoline consumption by 2.4 million tonnes.

We demonstrate that the carbon tax imposed by the Canadian province of British Columbia caused a decline in short-run gasoline demand that is significantly greater than would be expected from an equivalent increase in the market price of gasoline. That the carbon tax is more salient, or yields a larger change in demand than equivalent market price movements, is robust to a range of specifications. As a result of the large consumer response to the tax, we calculate that during its first four years, the tax reduced carbon dioxide emissions from gasoline consumption by 2.4 million tonnes.