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The Costs of Compliance: A CGE Assessment of Canada's Policy Options under the Kyoto Protocol

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  • Christoph Böhringer
  • Thomas F. Rutherford

Abstract

Abstract Canada has committed itself under the Kyoto Protocol to reduce greenhouse gas emissions between 2008 and 2012 on average by six per cent from the base 1990 level. As of 2009, however, Canada's greenhouse gas emissions are far above its 1990 level which calls for stringent short-term policy measures if Canada is to meet its legally binding commitment. This paper uses a multi-region, multi-commodity static general equilibrium model to quantify the economic impacts of alternative compliance strategies for Canada in the context of climate policies undertaken by other Kyoto parties. The numerical results confirm fears by Canadian policymakers of substantial economic adjustment costs should Canada fulfill its Kyoto commitments solely through domestic action. However, a rigorous use of the project-based CDM on top of international emissions trading could allow Canada to live up to its international climate policy commitment at politically much more tolerable costs. Copyright 2009 Blackwell Publishing Ltd. Journal compilation 2009 Blackwell Publishing Ltd.

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  • Christoph Böhringer & Thomas F. Rutherford, 2010. "The Costs of Compliance: A CGE Assessment of Canada's Policy Options under the Kyoto Protocol," The World Economy, Wiley Blackwell, vol. 33(2), pages 177-211, February.
  • Handle: RePEc:bla:worlde:v:33:y:2010:i:2:p:177-211
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    References listed on IDEAS

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    1. Dissou, Yazid, 2005. "Cost-effectiveness of the performance standard system to reduce CO2 emissions in Canada: a general equilibrium analysis," Resource and Energy Economics, Elsevier, vol. 27(3), pages 187-207, October.
    2. Gernot Klepper & Sonja Peterson, 2005. "Trading Hot-Air. The Influence of Permit Allocation Rules, Market Power and the US Withdrawal from the Kyoto Protocol," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(2), pages 205-228, October.
    3. Richard Tol, 2002. "Estimates of the Damage Costs of Climate Change. Part 1: Benchmark Estimates," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 21(1), pages 47-73, January.
    4. Hagem, Cathrine & Maestad, Ottar, 2006. "Russian exports of emission permits under the Kyoto Protocol: The interplay with non-competitive fuel markets," Resource and Energy Economics, Elsevier, vol. 28(1), pages 54-73, January.
    5. Richard Tol, 2002. "Estimates of the Damage Costs of Climate Change, Part II. Dynamic Estimates," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 21(2), pages 135-160, February.
    6. Niels Anger & Christoph Böhringer & Ulf Moslener, 2007. "Macroeconomic impacts of the CDM: the role of investment barriers and regulations," Climate Policy, Taylor & Francis Journals, vol. 7(6), pages 500-517, November.
    7. Lawrence Goulder, 1995. "Environmental taxation and the double dividend: A reader's guide," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(2), pages 157-183, August.
    8. Azusa OKAGAWA & Kanemi BAN, 2008. "Estimation of substitution elasticities for CGE models," Discussion Papers in Economics and Business 08-16, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
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