Using Difference-in-Differences Analysis and the Kocyk Geometric Lag Model to Estimate Aspects of Carbon Tax Effectiveness in Nordic Countries

Author

Kyle Riley, Union College - Schenectady, NYFollow

Date of Award

3-2021

Document Type

Open Access

Degree Name

Bachelor of Arts

Department

Economics

First Advisor

Caroline Abraham

Keywords

Environmental economics, econometrics, Carbon Tax, Carbon Emissions, Nordic

Abstract

This paper generally looks at the connections between carbon taxes and carbon emission levels in Nordic countries over a period from the 1960s to the early 2010s. Most of the existing literature on this topic looks at and finds that carbon taxes do have a significant impact upon carbon emissions levels in some countries while not in others. In many countries which have this policy there is not a significant impact that can be seen and there is a discussion as to why this might be the case and what needs to be done to fix these potential issues to effectively combat climate change. There are many other ideas about what policies may or may not lower emissions levels, and one such idea is looking at how carbon taxes might become less effective reducing carbon emissions. This paper attempts to take a more in depth look at the way carbon taxes impact emissions levels and how the effectiveness might change and deviate over time.

Using different econometric approaches, this paper asks a slightly different question than what most of the existing literature looks at. Instead of looking at the short-term impacts of carbon taxes on carbon emissions this paper looks at this question from a longer-term perspective where the effect of these taxes can change and deviate, especially if the rate of carbon taxes is not updated to a degree where it keeps up with increasing price levels within a country. This is where the Koyck geometric lag model is used. Another approach which is used throughout is to use difference-in-differences analysis where a control country with no carbon taxes is used to compare treatment countries which have active carbon tax policies to look at the differences in emission levels between countries which do and do not have tax policies. This style of econometrics is utilized to somewhat simulate how a traditional scientific experiment would be constructed, by looking at the causal impacts of a policy implementation which in this case is the carbon tax.

Recommended Citation

Riley, Kyle, "Using Difference-in-Differences Analysis and the Kocyk Geometric Lag Model to Estimate Aspects of Carbon Tax Effectiveness in Nordic Countries" (2021). Honors Theses. 2503.
https://digitalworks.union.edu/theses/2503