Pass-through — the share of a tax change that reaches the consumer price — is the core object of competition, merger, and tax-incidence economics. It is usually hard to estimate because the "shock" is endogenous or its size is unknown. Canada's consumer carbon price on gasoline is the rare exception: the per-litre amount is published statutorily by the Canada Revenue Agency, and it was removed on a single, pre-announced date — 1 April 2025. That makes pass-through a ratio: the observed retail drop divided by the known – ¢/L charge.
The federal gasoline fuel charge rose every April from 4.42 ¢/L (2019, $20/t) to
– ¢/L (2024, $80/t) before being removed.
Because GST/HST is levied on the carbon-inclusive pump price, removing the charge
also strips the sales tax on it, so the expected pump drop is
charge × (1 + GST/HST) =
– ¢/L on average across treated cities. We
benchmark pass-through against this GST-adjusted figure, not the bare charge. A
second known shock — the federal excise suspension of 14 April 2026 — gives an
independent replication.
Weekly city retail gasoline prices (NRCan; StatCan monthly for the panel), a crude/wholesale benchmark (FRED WTI / EIA), and CRA statutory rates. The treated units are the federal-backstop provinces; British Columbia ended its own carbon tax the same day, so BC is treated, not a control. The clean no-removal arm is Quebec (cap-and-trade, retained).
The irreducible threat is oil-price confounding: the pump price moves with crude regardless of tax. Every event study below is run with and without the wholesale control; the tax effect must survive it.
An interrupted-time-series on treated-city weekly prices estimates the level shift, controlling for contemporaneous and lagged wholesale. The dynamic path (dashboard) is flat before the date and steps down after — pre-trends are flat in magnitude (largest pre-event lead – ¢/L).
The gap between the controlled and naive estimates is the headline methodological point:
Pooling treated and Quebec cities, the treated×post interaction is – ¢/L ( of the expected drop). Quebec's own margin is stable across the date (shift – ¢/L), supporting its validity as a control.
An asymmetric error-correction model lets retail prices adjust at different speeds to cost increases vs decreases. The estimated half-life is – weeks upward versus – weeks downward; the formal symmetry test gives .
The headline: – of the GST-adjusted statutory drop passed through, with a block-bootstrap 95% CI of . Complete pass-through (100%) inside the interval.
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