Carbon Pricing: Provincial differences and the risk of Carbon Leakage

In the second of two reports it has published on carbon pricing, the EcoFiscal Commission concludes that “In the context of a $30 per tonne carbon price, only a small number of sectors, representing less than 5 per cent of Canada’s economy, are likely to experience significant competitive pressures. Even with a $120 per tonne carbon price … 90 per cent of Canada’s economy would still be virtually unaffected by competitiveness challenges. ”   Provincial Carbon Pricing & Competitiveness Pressures: Guidelines for Business and Policy Makers  examines the economies of British Columbia, Alberta, Ontario, and Nova Scotia, and states that impacts will differ across sectors and provinces. In Alberta, 18 % of the economy is potentially exposed, compared to 2% in B.C., Ontario, and Nova Scotia.   The report recommends targeted, transparent, and temporary support measures for genuinely vulnerable industries, in the form of free permits (under a cap and trade system) or carbon tax rebates. Other recent reports related to carbon pricing: Implementing Effective Carbon Pricing  from the New Climate Economy; “The Path to Carbon Pricing” by Christine Lagarde (IMF) and Jim Yong Kim (World Bank) in Project Syndicate; and Uses of Revenue from Carbon Pricing in which the Climate Markets and Investment Association forecasts that globally, governments will raise $22 billion in climate revenue in 2015. From Resources for the Future, Lessons Learned from Three Decades of Experience with Cap-and-Trade examines U.S. programs and the European ETS.

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