Effect of Carbon Tax on CO2 Emissions

Abstract

The aim of this chapter is to analyze the impact of the carbon tax on carbon emissions in Norway. In the chapter, per capita income, carbon tax, and CO2 emissions series were used. The focus of the study is to obtain results with higher accuracy by taking advantage of the power of Fourier-based unit root and cointegration tests. For this reason, as a method, in addition to the traditional unit root tests, Fourier KPSS stationarity test and Fourier ADL cointegration test were applied to the series. The Fourier KPSS stationarity test showed that all series had unit roots at level, and the Fourier ADL cointegration test showed the existence of a long-term relationship between the series. The findings indicate that a 1% increase in carbon taxes in Norway could reduce carbon emissions by 0.046% in the long term. In other words, carbon taxes implemented in Norway have been found to have a very limited effect on reducing CO2 emissions.