IMF Working Papers

Canada’s Carbon Price Floor

By Ian W.H. Parry, Victor Mylonas

March 8, 2018

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Ian W.H. Parry, and Victor Mylonas. Canada’s Carbon Price Floor, (USA: International Monetary Fund, 2018) accessed November 8, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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.

Subject: Carbon tax, Environment, Expenditure, Fuel prices, Fuel tax, Greenhouse gas emissions, Non-renewable resources, Public expenditure review, Taxes

Keywords: Aggressive pricing, Backstop system, Canada, Carbon price, Carbon pricing, Carbon tax, Competitiveness impacts, Differentiated pricing, Downstream pricing, Effective carbon price, Emissions pricing, Firm, Fuel tax, Global, Greenhouse gas emissions, Incidence, Non-renewable resources, Price, Price floor, Pricing, Pricing instrument, Pricing scheme, Public expenditure review, Share, Upstream pricing, Welfare impacts, WP

Publication Details

  • Pages:

    27

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2018/042

  • Stock No:

    WPIEA2018042

  • ISBN:

    9781484345191

  • ISSN:

    1018-5941

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