Natural Capital Measurement at Statistics Canada: Current Status and Untapped Potential

This report provides an overview of Statistics Canada’s efforts to measure the state of Canada’s natural capital (ecosystems, land and sub-soil resources), the demands placed upon it by human activities and the efforts undertaken to manage these demands. The goals of this paper are to promote awareness of the valuable natural capital data Statistics Canada produces and to identify areas where further data collection and analysis could usefully be carried out, both by Statistics Canada and by outside researchers.

Improving Audit Mechanisms for Environmental Information Disclosure Programs

Studies founded both in economic theory and empirical research have shown that when firms self-report their pollution, their environmental performance improves. However, the success of this approach depends upon compliance by firms, and budgetary constraints for enforcement provisions of environmental information disclosure programs may limit their effectiveness in promoting environmentally beneficial outcomes. A fine-based enforcement system can usually deter non-compliance, but requires (especially when fines are capped) sufficiently high audit probabilities to do so. These probabilities can be costly for regulators to achieve.

Carbon Pricing and Mind the Hissing

A number of provinces have either adopted or are considering climate policy options involving`carbon pricing.' Carbon pricing, i.e. internalizing the social cost of emitting carbon into the atmosphere, is the economically most efficient solution to fixing the environmental externality problem underlying climate change (Jae, Newell, and Stavins 2005). Depending on the stringency of targets and parameters of the policy regime adopted, such programs can generate a sizeable amount of revenue.

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About the Project

The goal of this project is to shed light on the relationship between economic activity and the environment by exploring the linkages between changes in our natural capital and our measures of productivity generally, and through the construction of an environmentally adjusted measure of productivity specifically.

While it is now commonly accepted that economic activity and the state of our environment are linked, many economic measures still fail to incorporate the environment – both the things we draw from it and the pollution we release into it. By developing and calculating measures of productivity that include natural capital, Canada may be able to better understand these linkages. This, in turn, may lead to the identification of strategies that can help Canada become more efficient and innovative in the use and protection of natural capital, and thus more productive and more prosperous.

Using the forestry sector as a case study, this project aims to construct an environmentally adjusted measure of multifactor productivity. In doing so, we aim to add another layer of understanding to the environmental and economic performance of this sector. The proposed measure will have relevance to the Canadian economy as a whole.