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

Author

Listed:
  • Dave Sawyer

    (Enviroeconomics)

  • Carolyn Fischer

    (Resources for the Future)

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.

Suggested Citation

  • Dave Sawyer & Carolyn Fischer, 2010. "Better Together? The Implications of Linking Canada-US Greenhouse Gas Policies," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 307, August.
  • Handle: RePEc:cdh:commen:307
    as

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    File URL: https://www.cdhowe.org/public-policy-research/better-together-implications-linking-canada-us-greenhouse-gas-policies
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    References listed on IDEAS

    as
    1. Jan Carr, 2010. "Power Sharing: Developing Inter-Provincial Electricity Trade," C.D. Howe Institute Commentary, C.D. Howe Institute.
    2. William B.P. Robson & Colin Busby, 2010. "Freeing up Food: The Ongoing Cost, and Potential Reform, of Supply Management," C.D. Howe Institute Backgrounder, C.D. Howe Institute, issue 128, April.
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    5. John Richards, 2010. "Reducing Lone-Parent Poverty: A Canadian Success Story," C.D. Howe Institute Commentary, C.D. Howe Institute.
    6. Angelo Melino & Michael Parkin, 2010. "Greater Transparency Needed," e-briefs 102, C.D. Howe Institute.
    7. Robert Knox, 2010. "Who Can Work Where: Reducing Barriers to Labour Mobility in Canada," C.D. Howe Institute Backgrounder, C.D. Howe Institute, issue 131, June.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Kevin D. Moore & William Robson & Alexandre Laurin, 2010. "Canada’s Looming Retirement Challenge: Will Future Retirees Be Able to Maintain Their Living Standards upon Retirement?," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 317, December.
    2. Philippe Bergevin & David Laidler, 2010. "Putting Money Back into Monetary Policy: A Monetary Anchor for Price and Financial Stability," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 312, October.
    3. Pierre Siklos & Andrew Spence, 2010. "Faceoff: Should the Bank of Canada Release its Projections of the Interest Rate Path? – The Cases For and Against," C.D. Howe Institute Backgrounder, C.D. Howe Institute, issue 134, October.
    4. Bob Baldwin & Brian FitzGerald, 2010. "Seeking Certainty in Uncertain Times: A Review of Recent Government-Sponsored Studies on the Regulation of Canadian Pension Plans," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 310, September.
    5. Clyde Goodlet, 2010. "Too Big to Fail: A Misguided Policy in Times of Financial Turmoil," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 311, October.
    6. Benjamin Dachis, 2010. "Picking up Savings: The Benefits of Competition in Municipal Waste Services," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 308, September.
    7. Stuart Landon & Constance Smith, 2010. "Energy Prices and Alberta Government Revenue Volatility," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 313, November.
    8. David Longworth, 2010. "Warding Off Financial Market Failure: How to Avoid Squeezed Margins and Bad Haircuts," C.D. Howe Institute Backgrounder, C.D. Howe Institute, issue 135, December.
    9. Andrew Green & Michael Trebilcock, 2010. "The Eco-Fee Imbroglio: Lessons from Ontario’s Troubled Experiment in Charging for Waste Management," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 316, December.

    More about this item

    Keywords

    Economic Growth and Innovation; greenhouse gas (GHG) emissions; Canada; US; emissions trading system;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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