Environmental markets represent a new way of understanding the value of our country’s rich natural capital, particularly their value to our economy. Such markets would reflect the true worth of these assets to our economy and quality of life and encourage greater attention to their preservation. While there is a growing international awareness of environmental markets, this concept has not yet fully informed Canadian policy or innovation. Sustainable Prosperity disseminates this body of knowledge and develops specific policy applications for Canada.
The aim of this report is to explore how environmental markets can be employed as a way to maintain and improve environmental quality and limit pollution as Southern Ontario’s population and economy grow. By creating an explicit value where none currently exists, they can help incentivize Southern Ontario’s businesses, farmers and other landowners, and citizens to protect Ontario’s air, water, and biodiversity.
Canadians enjoy immense wealth from our natural environment. We extract goods from the environment in the form of renewable and non-renewable resources (such as metal ores and timber), and benefit from the ecosystem services the environment provides (such as the filtering of air by trees and the absorption of flood waters by plains and wetlands).
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.
Over the past eight years, the City of Toronto has experienced a dramatic drop in both its absolute and per capita water consumption rates. Water demand in Toronto has declined by 14% overall and by 24% on a per capita basis over the same period. At first glance, this appears to be a huge success for the City’s water conservation efforts. This study investigates the cause of the decline by exploiting two unique datasets to decompose the effects of weather and seasonal variation, infrastructure improvements and varying price structures.
Sustainable Prosperity (SP) is releasing its first annual report tracking the value of Canada’s environmental markets. The 57 markets covered in this report transact nearly half a billion dollars of payments annually. This value will increase as new markets like the Quebec greenhouse gas cap-and-trade system develop. SP’s report analyses the state of development of Canadian environmental markets, and makes recommendations to help further the development of well-functioning markets, to contribute to environmental quality and economic prosperity.
The case studies demonstrate that economic instruments are in their formative stages in Canada, with challenges among those either implemented or in the process of continuing implementation. Alongside the Canadian cases are examples that have been adopted within a country of comparatively high water scarcity and water quality concerns, Australia (Murray-Darling Basin, Hunter River Salinity Trading Scheme).
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.