Canada’s Carbon Price Floor
IMF Working Papers, March 8, 2018
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- Canada’s Carbon Price Floor
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Bibliographic details
- Authors: Ian W.H. Parry, Victor Mylonas
- Published: March 8, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484345191.001
Overview
- Pan-Canadian approach to carbon pricing announced in October 2016, ensuring carbon pricing applies throughout Canada in 2018, with increasing stringency over time to reduce emissions.
- Provinces and territories may implement either:
- an explicit price-based system—with a minimum price of CAN $10 per tonne of carbon dioxide equivalent in 2018, increasing to CAN $50 per tonne by 2022; or
- an equivalently scaled emissions trading system.
- Paper length: 27 pages.
Rationale and Design
- Discusses the rationale for, and design of, the price floor requirement.
- Flexibility: allows provincial/territorial choice between downstream price-based systems and equivalently scaled emissions trading systems.
Environmental, Fiscal, and Welfare Impacts (Provincial-level)
- Examines provincial-level:
- environmental impacts (emissions reduction objectives tied to increasing stringency over time);
- fiscal impacts (pricing provides significant new revenues);
- economic welfare impacts (general conclusion: welfare costs are manageable).
- Keywords tied to analysis include: aggressive pricing, backstop system, carbon price, Carbon tax, competitiveness impacts, differentiated pricing, downstream pricing, effective carbon price, emissions pricing, firm, Fuel tax, Greenhouse gas emissions, incidence, Non-renewable resources, price floor, upstream pricing, welfare impacts.
Monitoring and National Incidence
- Addresses monitoring issues necessary to implement and enforce pricing regimes.
- Considers national-level incidence of the carbon price floor.
Conclusions and Policy-Relevant Finding
- General conclusion: welfare costs and implementation issues are manageable, and pricing provides significant new revenues.
- Key challenge: the floor price by itself appears well short of what will be needed by 2030 for Canada’s Paris Agreement pledge.
Content in this bundle
- Canada’s Carbon Price Floor, WP/18/42, March 2018