IDEAS home Printed from
   My bibliography  Save this paper

Electricity Market Deregulation and CO2 Emissions Reduction: Dancing at Different Tune across Canada and U.S. Border


  • Bernard, Jean-Thomas
  • Clavet, Frederic
  • Ondo, Jean-Cleophas


Canada has ratified the Kyoto Protocol while the United States, its main trading partner, have not. A major concern of Canadian industrial producers is the negative impact on competitiveness of progorams designed to reduce greenhouse gas emissions (GHG). To alleviate this concern, the Government of Canada is proposing an approach that puts a ceiling on the price of emission permits paid by industrial users and that allocate emission permits on the base of output. We analyze how such a scheme would affect electricity production and trade among three Canadian provinces (Ontario, Québec and New Brunswick) and two U.S. regions (New England and New York), which are linked by large interconnections and which exchange electricity on other wholesale markets. We find that the Canadian government approach has almost no effect on electricity production and trade flows; so it is very effective at protecting the competitive position of electricity producers. However it does little to reduce GHG emissions. If we were to unbundle emission permits allocation and production an let the Canadian electricity producers face the permit price ceiling of $15 per tonne of CO2 equivalent, then the effect on electricity production in Canada depends on whether the U.S. regions persue an aggressive or lenient policy with respect to GHG emissions. The overall impact on GHG emissions in the five regions is rather small.

Suggested Citation

  • Bernard, Jean-Thomas & Clavet, Frederic & Ondo, Jean-Cleophas, 2003. "Electricity Market Deregulation and CO2 Emissions Reduction: Dancing at Different Tune across Canada and U.S. Border," Cahiers de recherche 0309, GREEN.
  • Handle: RePEc:lvl:lagrcr:0309

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Carl Shapiro, 1983. "Optimal Pricing of Experience Goods," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 497-507, Autumn.
    2. Gabszewicz, Jean J & Grilo, Isabel, 1992. "Price Competition When Consumers Are Uncertain about Which Firm Sells Which Quality," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(4), pages 629-650, Winter.
    3. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
    4. Carl Shapiro, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, Oxford University Press, vol. 98(4), pages 659-679.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Greenhouse gas emissions; Kyoto Protocol; Electric utilities;

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lvl:lagrcr:0309. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Manuel Paradis). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.