Better Together? The Implications of Linking Canada - US Greenhouse Gas Policies

32 Pages Posted: 18 Sep 2010

See all articles by Dave Sawyer

Dave Sawyer

affiliation not provided to SSRN

Carolyn Fischer

Resources for the Future

Date Written: September 16, 2010

Abstract

The Canadian and American economies are inextricably intertwined through trade. As the two countries debate plans to curb greenhouse gas (GHG) emissions, policymakers in both countries must consider how emissions policies, such as an emissions trading system that sets economy-wide limits on GHG emissions and allows firms to trade GHG emissions permits for the right to pollute, might coexist. This paper analyzes the implications of linking elements of potential Canadian and American GHG emissions trading systems, including the scope of emissions covered by the systems, national emissions-reduction targets, emissions permit prices, and cross-border trade of emissions permits. This assessment indicates that linked allowance trade with the US would not necessarily be the best policy for Canada to pursue, as the US develops its own system. Instead, Canada should forge ahead with its own system, while minimizing the risk of getting too far out of step with the US on relative carbon prices. A policy of “go-it-alone” with similar carbon price expectations, and a targeted innovation agenda, seems to be a low-risk strategy for Canada as it develops its emissions policies.

Keywords: Economic Growth and Innovation, greenhouse gas (GHG) emissions, Canada, US, emissions trading system

JEL Classification: F13, F18, Q56

Suggested Citation

Sawyer, Dave and Fischer, Carolyn, Better Together? The Implications of Linking Canada - US Greenhouse Gas Policies (September 16, 2010). C.D. Howe Institute , Available at SSRN: https://ssrn.com/abstract=1678070 or http://dx.doi.org/10.2139/ssrn.1678070

Dave Sawyer (Contact Author)

affiliation not provided to SSRN ( email )

Carolyn Fischer

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States
202-328-5012 (Phone)
202-939-3460 (Fax)

HOME PAGE: http://www.rff.org/~fischer

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