Environmental Markets 2013

Our Second Annual Survey

Canadians benefit enormously from Canada’s natural environment. Firms and industries extract natural resources for use in their production processes; individuals enjoy access to it for positive health effects and recreation; and all Canadians benefit from the natural services it provides -- such as the purification of air provided by forests and flood control provided by wetlands and plains.
Our annual survey tracks the way environmental markets are used in Canada, in the areas of:
  • air and carbon
  • biodiversity and habitat
  • and water.

Environmental markets allow us to see the full costs of using our environment and the full benefits of preserving it. Properly designed environmental markets can help promote economic activity that is environmentally sustainable.

In 2013, our survey found the value of environmental markets in Canada is to be between $406 million and $625 million. This represents no discernible growth from our previous estimate of the value of environmental markets in 2011.

Our 2012 survey finds that new environmental markets are emerging. The highlight from the past year has been the official launch of Quebec’s greenhouse gas emissions cap-and-trade system, linked with California’s cap-and-trade system. This new market is not counted in this year’s survey because it was not operational in 2012.
Canada has the potential to use environmental markets much more widely. For example, Quebec’s new carbon market alone is estimated to have an annual value of $425 million by 2016.
Climate change policy will continue to be the main driver of new environmental markets. Provinces are developing greenhouse gas reduction policies that will likely include environmental markets. The pending federal oil and gas sector greenhouse gas regulations may contain provisions for market mechanisms to facilitate the achievement of emissions reductions.
SP’s annual survey of environmental markets will continue to bring the current state of environmental markets to the attention of Canadians, in the hopes that they can be more widely implemented in Canada. Creating the right policy framework to allow environmental markets to develop and to be effective will remain a challenge, but should become easier as Canada’s use of these markets grows. The more Canadians become familiar with them in concept and in practice, the greater the likelihood that environmental markets will make a critical contribution to Canada’s sustainable development.
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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.