CANADA could do more to limit carbon emissions, which have risen in recent years even as they have fallen south of the border. As if to rub it in, Barack Obama recently warned that unless it does, he will not approve the Keystone XL pipeline to bring oil from Alberta's tar sands to Texas. Yet America itself can learn a thing or two about climate policy from British Columbia (BC).

In 2008 the Canadian province became the first North American jurisdiction to introduce a carbon tax. Now a study has found that the levy has led to a big drop in fossil-fuel consumption and greenhouse-gas emissions without hurting the economy. And, to the delight of BC's citizens, it let the provincial government cut personal and corporate tax rates. Stewart Elgie, an economist at the University of Ottawa and lead author of the report, calls it a rare win-win.

The tax, which is levied on nearly all fossil fuels, was designed to help BC meet its self-imposed target of reducing greenhouse-gas emissions by 33% below 2007 levels by 2020. (Canada's federal target, like America's, is to cut them to 17% below 2005 levels by 2020.) Initially set at C$10 ($9.60) per tonne of carbon-dioxide equivalent, it rose each year until it reached C$30 per tonne in 2012. The tax covers 77% of BC’s greenhouse-gas emissions from residential, commercial and industrial sources. It accounts for seven cents of the C$1.46 Vancouverites pay for a litre of petrol.

As a way to curb emissions, the scheme has been a roaring success. According to the report, before 2008 the average British Columbian used as much fuel as other Canadians did. By 2012 fuel consumption per person had dropped by 17.4% in BC, even as it rose by 1.5% in the rest of the country. The province now uses less fuel per head than any other. Overall emissions declined, too, by 10% between 2008 and 2011. At the same time BC's consumption of aviation fuel, which is exempt from the tax, remained in line with other provinces', bolstering the case that the shift can be attributed to the tax and not some other factor.

Crucially, the levy does not appear to have hurt families, the poor and businesses, as opponents argued it would. In fact, BC's economic performance, though hardly stellar—output per person dipped by 0.15% in the period 2008-11—was slightly less miserable than the 0.23% drop in the rest of Canada. Mr Elgie attributes this benign effect to the tax's revenue-neutral design, so every dollar raised is to be returned in tax cuts, and gradual phase-in, giving companies and individuals time to adjust. The resulting tax cuts amounted to C$1.14 billion in 2011-12 alone (C$182 million more than the carbon tax brought in). BC now has the lowest personal income tax rate in Canada for those earning up to C$119,000 and is tied with Alberta and New Brunswick for the lowest corporate rates.

Mary Polak, the provincial environment minister, acknowledges that the carbon-tax rate has been frozen for the next five years so as not to nobble BC's industry, which must compete with rivals elsewhere that face no such levy. She would now like to see "catch-up" from other provinces, as well as American states. There are some hopeful signs: Washington, Oregon and Massachusetts are mulling similar schemes.

One threat to BC’s green record is a nascent natural-gas bonanza. A new ministry has been set up to deal with proposals (of which there are currently about a dozen) to build gas pipelines to carry natural gas from north-eastern BC to terminals on the north-west coast. There it would be turned into liquefied natural gas (LNG) and shipped to lucrative Asian markets. But converting natural gas to LNG takes lots of energy, and there is not enough clean hydroelectric power to go round. So conversion plants would probably have to burn natural gas, which is a fossil fuel (albeit a relatively clean one). Ms Polak valiantly argues that although the LNG projects may have a negative impact on BC’s emissions this would be more than offset by improvements to China's, which would burn less dirty coal. She may well be right. Whether British Columbians are willing to pay for reducing China's carbon footprint is another matter.