Canada's Carbon Price Floor

28 Pages Posted: 5 Apr 2018

See all articles by Ian Parry

Ian Parry

International Monetary Fund (IMF)

Victor Mylonas

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2018

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: Western Hemisphere, Canada, carbon price, price floor, welfare impacts, incidence, effective carbon price, competitiveness impacts, Environmental Economics: Government Policy

JEL Classification: Q54, Q58, H23

Suggested Citation

Parry, Ian and Mylonas, Victor, Canada's Carbon Price Floor (March 2018). IMF Working Paper No. 18/42. Available at SSRN: https://ssrn.com/abstract=3157013

Ian Parry (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Victor Mylonas

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
16
Abstract Views
101
PlumX Metrics