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The pan-Canadian approach to carbon pricing, announced in October 2016, ensures that carbon pricing applies throughout Canada in 2018, with increasing stringency over time to reduce emissions. Canadian provinces and territories have the flexibility to either implement 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. This paper discusses the rationale for, and design of, the price floor requirement; its (provincial-level) environmental, fiscal, and economic welfare impacts; monitoring issues; and (national-level) incidence. The general conclusion is that the welfare costs and implementation issues are manageable, and pricing provides significant new revenues. A challenge is that the floor price by itself appears well short of what will be needed by 2030 for Canada’s Paris Agreement pledge.
The pan-Canadian approach to carbon pricing, announced in October 2016, ensures that carbon pricing applies throughout Canada in 2018, with increasing stringency over time to reduce emissions. Canadian provinces and territories have the flexibility to either implement 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. This paper discusses the rationale for, and design of, the price floor requirement; its (provincial-level) environmental, fiscal, and economic welfare impacts; monitoring issues; and (national-level) incidence. The general conclusion is that the welfare costs and implementation issues are manageable, and pricing provides significant new revenues. A challenge is that the floor price by itself appears well short of what will be needed by 2030 for Canada’s Paris Agreement pledge.
Shows readers how we can all help solve the climate crisis by focusing on a few key, achievable actions.
To improve Canada's prospects for achieving a single economy-wide carbon price and cost-effective emissions reductions, the federal government should introduce a national carbon price floor and a federal carbon tax to work alongside provincial carbon-pricing policies. [...] This E-Brief accordingly recommends that the federal government: • take an active role in carbon pricing with the aim of achieving a single economy-wide carbon price and improving the cost effectiveness of emissions reductions in Canada; • implement a national carbon price floor and a federal carbon tax, to work alongside decentralized provincial policies to reduce - and eventually eliminate - car [...] Making the Case for a Single Carbon Price A single price on carbon would ensure that the marginal cost of abatement - that is, the cost of an additional one tonne reduction in emissions - is equal across provinces. [...] The expansion of the regional carbon market is cause for optimism, since carbon price differentials between covered emitters in Ontario and Quebec will be eliminated.3 Recent modelling analysis finds that, compared to a stand-alone scheme, an Ontario cap-and-trade system linked to Quebec and California could achieve the province's 2020 emissions- reduction target with a lower carbon price, smaller [...] The carbon-pricing provinces have implemented policies to deal with competitiveness and leakage issues, but this approach does not ensure a level playing field between the provinces or between Canada and its competitors, and makes the federal government's task of implementing economy-wide measures considerably more complex.7 A Role for the Federal Government The decentralized, interprovincial appr.
This Climate Note discusses the rationale, design, and impacts of border carbon adjustments (BCAs), charges on embodied carbon in imports potentially matched by rebates for embodied carbon in exports. Large disparities in carbon pricing between countries is raising concerns about competitiveness and emissions leakage, and BCAs are a potentially effective instrument for addressing such concerns. Design details are critical, however. For example, limiting coverage of the BCA to energy-intensive, trade-exposed industries facilitates administration, and initially benchmarking BCAs on domestic emissions intensities would help ease the transition for emissions-intensive trading partners. It is also important to consider how to apply BCAs across countries with different approaches to emissions mitigation. BCAs are challenging because they pose legal risks and may be at odds with the differentiated responsibilities of developing countries. Furthermore, BCAs provide only modest incentives for other large emitting countries to scale carbon pricing—an international carbon price floor would be far more effective in this regard.
Addressing the poverty and distributional impacts of carbon pricing reforms is critical for the success of ambitious actions in the fight against climate change. This paper uses a simple framework to systematically review the channels through which carbon pricing can potentially affect poverty and inequality. It finds that the channels differ in important ways along several dimensions. The paper also identifies several key gaps in the current literature and discusses some considerations on how policy designs could take into account the attributes of the channels in mitigating the impacts of carbon pricing reforms on households.
Why the traditional “pledge and review” climate agreements have failed, and how carbon pricing, based on trust and reciprocity, could succeed. After twenty-five years of failure, climate negotiations continue to use a “pledge and review” approach: countries pledge (almost anything), subject to (unenforced) review. This approach ignores everything we know about human cooperation. In this book, leading economists describe an alternate model for climate agreements, drawing on the work of the late Nobel laureate Elinor Ostrom and others. They show that a “common commitment” scheme is more effective than an “individual commitment” scheme; the latter depends on altruism while the former involves reciprocity (“we will if you will”). The contributors propose that global carbon pricing is the best candidate for a reciprocal common commitment in climate negotiations. Each country would commit to placing charges on carbon emissions sufficient to match an agreed global price formula. The contributors show that carbon pricing would facilitate negotiations and enforcement, improve efficiency and flexibility, and make other climate policies more effective. Additionally, they analyze the failings of the 2015 Paris climate conference. Contributors Richard N. Cooper, Peter Cramton, Ottmar Edenhofer, Christian Gollier, Éloi Laurent, David JC MacKay, William Nordhaus, Axel Ockenfels, Joseph E. Stiglitz, Steven Stoft, Jean Tirole, Martin L. Weitzman
On 15 January 2018, the federal government published for public comment a document on draft legislation aimed at codifying its proposed national carbon pricing system.1 The Greenhouse Gas Pollution Pricing Act is expected to be introduced in the House of Commons during the 1st Session of the 42nd Parliament. [...] The proposed legislation would require provinces and territories to implement carbon pricing systems by 1 January 2019, or adopt a federally administered carbon pricing system that the federal government calls the "backstop." Jurisdictions where no carbon pricing system is adopted, or where the pricing system fails to meet federal standards, will have the backstop imposed on them, in whole or in p [...] Some cap-and-trade systems also set price caps and floors for emission allowance credits to support the price of the credits, maintain the incentive the carbon price is meant to create, and safeguard the cap-and-trade system from wide fluctuations in the price or supply of emission allowance credits.10 3 CARBON PRICING IN CANADA Four provinces - British Columbia, Alberta, Ontario and Quebec - have [...] The working group's final report identified principles for a pan-Canadian approach to carbon pricing and concluded that on the whole, carbon pricing is one of the more efficient tools available to governments to incent a transition to a low carbon economy, allowing for an increase in the level of ambition in reducing GHGs, promoting clean economic growth, and the possibility for enhanced cooperati [...] Regarding the fuel charge, prices would be based on the GHG emission content of each fuel and would correspond with the carbon prices specified in the federal benchmark.
With the effects of climate change already upon us, the need to cut global greenhouse gas emissions is nothing less than urgent. It’s a daunting challenge, but the technologies and strategies to meet it exist today. A small set of energy policies, designed and implemented well, can put us on the path to a low carbon future. Energy systems are large and complex, so energy policy must be focused and cost-effective. One-size-fits-all approaches simply won’t get the job done. Policymakers need a clear, comprehensive resource that outlines the energy policies that will have the biggest impact on our climate future, and describes how to design these policies well. Designing Climate Solutions: A Policy Guide for Low-Carbon Energy is the first such guide, bringing together the latest research and analysis around low carbon energy solutions. Written by Hal Harvey, CEO of the policy firm Energy Innovation, with Robbie Orvis and Jeffrey Rissman of Energy Innovation, Designing Climate Solutions is an accessible resource on lowering carbon emissions for policymakers, activists, philanthropists, and others in the climate and energy community. In Part I, the authors deliver a roadmap for understanding which countries, sectors, and sources produce the greatest amount of greenhouse gas emissions, and give readers the tools to select and design efficient policies for each of these sectors. In Part II, they break down each type of policy, from renewable portfolio standards to carbon pricing, offering key design principles and case studies where each policy has been implemented successfully. We don’t need to wait for new technologies or strategies to create a low carbon future—and we can’t afford to. Designing Climate Solutions gives professionals the tools they need to select, design, and implement the policies that can put us on the path to a livable climate future.