In addressing climate change, a solid consensus has emerged on the importance of placing a price on emitted carbon, whether through a tax or cap-and-trade system. Our work focuses on designing a carbon pricing policy and market models that are pragmatic and workable.
It examines the basic rationale for using such instruments, and their advantages. It also describes the existing markets for TRECs in Canada, in North America, and internationally.
In the absence of a carbon pricing framework that translates monetary value to one tonne of CO2, either through a tax or through the market price set by an emission trading system, policy and corporate leaders must create their own carbon cost estimate to use in decision-making. The Social Cost of Carbon attempts to put a price on damages arising from climate change, demonstrating what society or a company should be willing to pay now to reduce carbon emissions.
Our approach to this submission has been to focus our efforts on assessing the government’s overall approach to the development of a green economy in Canada. The definition we have used for a “green economy” has been quite broad, and so should be seen as capturing a fairly large swath of the measures contained in the budget. Our analysis is less concerned, however, with the overall level of support the budget contains, but is more focused on an assessment of the effectiveness, efficiency, and ultimate role of the budget in promoting a green economy in Canada.
This submission is intended to support the government’s implementation of a cap-and-trade system, and inform public debate on the detailed design of such a system in the coming year. It is organized into four sections:
1) Initial comments
2) Cap-and-trade systems
3) Québec and the Western Climate Initiative
Many jurisdictions, including Australia and the United States, have explored the possibility of a carbon bank. A carbon bank is an independent body, separate from political influence, responsible for oversight and management of the carbon market. This policy brief explores the role and functioning of a carbon bank, established by government as part of a cap-and-trade policy.
Absent any mitigation policies, carbon taxes and emissions trading schemes are inherently regressive, meaning that they disproportionately impact households with lower incomes. Policy-makers must carefully design carbon pricing policies with fairness in mind so that they do not exacerbate existing inequality stemming from broader social disadvantages such as race, socio-economic status, and community remoteness. The greatest determinant of the fairness of a carbon pricing policy is the choice of how revenues are spent. This Policy Brief.
However, carbon pricing tends to disproportionately impact lower-income groups, who spend a greater proportion of their income on carbon-intensive goods, and have less ability to make substitutions towards lower-carbon alternatives.
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.