Impacts on Canadian Competitiveness of International Climate Change Mitigation
Christopher Holling, DRI-WEFA
Robin Somerville, Standard & Poors DRI
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This article summarizes and provides additional perspective on a study that contributes to the growing body of analyses of the costs of limiting greenhouse gas emissions. The study estimates the economic costs to Canada of six planning scenarios. Four of these scenarios involve the use of tradable emission permits and two involved a carbon tax. In each case, the mechanism's target is to stabilize greenhouse gas emissions at some percentage of 1990 levels (100% or 90%) by either 2010 or 2015. Policies that impose greater constraints on carbon dioxide emissions lead to higher economic costs in terms of foregone output. These costs, however, vary for the same objective, depending on the mechanism chosen and the economic assumptions made. In one typical scenario, in which tradable emission permits are used to achieve stabilization at 1990 levels by 2010, GDP is depressed from the "business-as-usual" scenario by about 2% for the first decade, after which it recovers to business-as-usual levels. Generally, for all scenarios, the economic impact of climate change mitigation imposes a transition cost on the economy, but the long-term productive capacity of the economy is not significantly affected.
Climate Change; Greenhouse Gas Emission Limits; Canada; Economic Impact; Costs.