Carbon Pricing and Mind the Hissing

Marisa Beck 
Balsillie School of International Affairs

Randall Wigle 
School of International Affairs and School of Business and Economics, Wilfrid Laurier University

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. As will be detailed below, revenues from BC's carbon tax and Alberta's Specified Gas Emitter Regulation (SGER) each generate revenues in the hundreds of millions. If the stringency of these measures is increased, the amount of revenue is likely to rise. The purpose of this paper is to evaluate alternative uses of government revenues from carbon pricing and to provide preliminary criteria for their assessment in the Canadian context.

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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.