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.
While Canada is blessed with a rich endowment of natural resources, and a relatively small population, we still face significant, and growing, problems of biodiversity loss and natural resource depletion. Remedying these problems, and using our natural capital more productively, is essential to ensure an ecologically and economically healthy future.
In her contribution to the CPA, Nancy Olewiler warns that Canada is facing a crisis due to the mismanagement and loss of its natural resources and habitats. She argues that in order to secure natural capital in Canada, we must put a price on the ecological goods and services that our natural environment supplies. A number of market-based mechanisms are proposed to achieve this, including a tax on carbon and air pollutants (CAP tax), the revenues of which would be used to finance a national conservation plan.
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.