Canada’s Carbon Price Floor

Ian Parry and Victor Mylonas

No 2018/042, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; price; pricing; firm; carbon pricing; carbon price; share; price floor; Canada; welfare impacts; incidence; effective carbon price; competitiveness impacts; backstop system; pricing scheme; downstream pricing; emissions pricing; upstream pricing; pricing instrument; differentiated pricing; aggressive pricing; Carbon tax; Greenhouse gas emissions; Public expenditure review; Fuel tax; Non-renewable resources; Global (search for similar items in EconPapers)
Pages: 27
Date: 2018-03-08
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Citations: View citations in EconPapers (3)

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