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Policies to Reduce Greenhouse Gas Emissions in Canada

Issue: What are the best policies for Canada to reduce its greenhouse gas emissions in the long term?

Assumptions:

Issues Options
Tax-Driven Market Incentives Industry Regulatory Controls Diminishing Fossil Fuel Supplies
Fossil Fuel Tax on the Canadian Consumption of World Wide Emissions Fossil Fuel Tax on Emissions in Canada Fossil Fuel Emission Controls Process Controls Product Controls
Prohibit Emissions Cap But Allow Emissions
No Trade in Emission Savings Below the Cap Carbon Trading
Trade in Emission Savings Below the Cap Trade in Emission Savings Below the Cap Plus Offsets
Effectiveness
Emission Reduction Coverage Covers all emissions consumed by Canadians from the combustion of fossil fuels from world wide sources, (The percentage of current emissions is not known, but probably in line with the next option i.e. about 82 percent of total.) Does not cover Canada's emissions from non-fossil fuel sources (18.3 percent) e.g. industrial processes, agricultural, waste, land-use changes. Covers all emissions produced in Canada from the combustion of fossil fuels (81.7 percent of total). Does not cover approximately 18.3 percent of Canada's emissions from non-fossil fuels sources e.g. industrial processes, agriculture, waste, land-use changes. Covers all emissions produced in Canada from the combustion of fossil fuels by industry for energy through the combustion fossil fuels from stationary sources (35.8 percent). Would probably not include combustion of fossil fuels from stationary sources by construction, commercial, institutional, residential, agriculture and forestry (11.3 percent). Does not cover approximately 18.3 percent of Canada's emissions from non-fossil fuel sources e.g. industrial processes, agriculture, waste, land-use changes. Does not cover combustion for transportation (25.9 percent). Covers a portion of emissions produced in Canada from the combustion of fossil fuels by industry for energy through the combustion fossil fuels from stationary sources (35.8 percent). Current thinking limits the application of controls to major emitters and reduces the percentage below 35.8 percent. Would probably not include combustion of fossil fuels from stationary sources by construction, commercial, institutional, residential, agriculture and forestry (11.3 percent). Does not cover approximately 18.3 percent of Canada's emissions from non-fossil fuel sources e.g. industrial processes, agriculture, waste, land-use changes. Does not cover combustion for transportation (25.9 percent). Covers a portion of emissions produced in Canada from the combustion of fossil fuels by industry for energy through the combustion fossil fuels from stationary sources (35.8 percent). Current thinking limits the application of controls to major emitters and reduces the percentage below 35.8 percent. Would probably not include combustion of fossil fuels from stationary sources by construction, commercial, institutional, residential, agriculture and forestry (11.3 percent). Does not cover approximately 18.3 percent of Canada's emissions from non-fossil fuel sources e.g. industrial processes, agriculture, waste, land-use changes. Does not cover combustion for transportation (25.9 percent). Covers all emissions produced in Canada from the combustion of fossil fuels by industry for energy through the combustion fossil fuels from stationary sources (35.8 percent). Current thinking limits the application of controls to major emitters. and reduces the percentage below 35.8 percent. Would probably not include combustion of fossil fuels from stationary sources by construction, commercial, institutional, residential, agriculture and forestry (11.3 percent). Does not cover approximately 18.3 percent of Canada's emissions from non-fossil fuel sources e.g. industrial processes, agriculture, waste, land-use changes. Does not cover combustion for transportation (25.9 percent). Covers emissions produced by processes n Canada i.e. the stationary combustion of fossil fuels in fossil fuel production, mining, oil and gas extraction and manufacturing (18.4 percent); fugitive emissions related to fossil fuel extraction (8.8 percent); industrial processes (7.2 percent), animal farming [enteric fermentation and manure management] (4.3 percent), and solid waste disposal (3.5 percent) Covers products that would be controlled. Likely candidates would be major consumer products that involve substantial emissions for which viable alternatives exist e.g. light duty gasoline vehicles and trucks (11.4 percent), residential furnaces and hot water heaters (5.8 percent). Covers all emissions produced in Canada from the combustion of fossil fuels (81.7 percent of total). Does not cover approximately 18.3 percent of Canada's emissions from non-fossil fuels sources e.g. industrial processes, agriculture, waste management, land- use changes.
Emission Reduction Efficiency within Emission Coverage Efficiency depends on the amount of tax per emission. With a prohibitively high tax rate, the option will be almost totally efficient. Given the revenue neutrality requirement, the initial rate would be around $0.52 per kilogram of CO2 equivalent in emissions, or $1.25 per litre of gasoline, or $1.01 per cubic metre of natural gas.(See calculations). As emissions fall, tax rates and emission reduction efficiency would rise. Efficiency depends on the amount of tax per emission, With prohibitively high taxes, the option will be almost totally efficient. Given the revenue neutrality requirement, the initial rate would be around $0.52 per kilogram of CO2 equivalent in emissions, or $1.25 per litre of gasoline, or $1.01 per cubic metre of natural gas.(See calculations). As emissions fall, tax rates and emission reduction efficiency would rise. Totally efficient, subject to the ability to monitor and enforce the regulatory controls. Emission reduction efficiency would depend on the cap level over time, and particularly the ability of successive governments to set progressively lower caps until the cap is zero against the continual industry and special interest pressure to fight the progressively lower caps. Given the industrial pressure, elections,government changes, etc., efficiency is likely to be low, particularly given the inherently unfair coverage with some facilities covered and others not. In addition, the ability to monitor and enforce controls is also an issue. Emission reduction efficiency would be identical to the previous option, except for the "trade" effect. The trade effect would make this option inferior to the previous option, to the extent that some facilities would go below their caps. With the "no trade" approach, emissions would always be below the cap. With the "trade" approach, emissions would total those allowed by the cap. For many facilities, one would anticipate modest emissions reductions through efficiency, and then big drops in emissions as the facility changes technologies (i.e. replacing stationary combustion to electricity for heating purposes) Emission reduction efficiency would be identical to the previous option, except for the "offset" effect. Defining what is an eligible offset, and monitoring and enforcing the offset to ensure the offset actually delivers the expected reductions is likely to be a bureaucratic nightmare, and ultimately a disaster. As a consequence, this option is likely to be highly inefficient. Emission reduction efficiency would be severely restricted due to the challenges of developing process standards across a wide range of lines of business and company situations within the line of business against inevitable opposition from affected industries and the risk of job losses, and the challenges of monitoring and enforcing the process standards. Some potential may exist related to animal farming and solid waste disposal. Emission reduction efficiency could be relatively high provided consumers were given ample time to adapt to new product controls. Emission reduction efficiency would be high in the long term if the option simply blocked investments in new fossil fuel production and import controls were in place. In the short term, the combination of reduced supply, price controls, allocated supplies and the inevitable emergence of black markets would make the option unsustainable.
Implementation Timing Implementable in the short term following the passage of legislative. Implementable in the short term following the passage of legislation, If confined to frivolous emissions, implementable in the short term. Implementable in the medium to long term because of the necessity to coordinate implementation with the United States, for which the necessary political consensus may take years. Implementable in the medium to long term because of the necessity to coordinate implementation with the United States, for which the necessary political consensus may take years. Implementable in the medium to long term because of the necessity to coordinate implementation with the United States, for which the necessary political consensus may take years. Partially implementable in the short term, where process control standards either exist or could be established. Otherwise, implementable in the medium to long term because of the complexity of developing necessary standards. Implementable in the short term, although the effects of implementation may not appear for some time if controls are implemented slowly. Implementable in the short term with regard to both supply controls and related policies, and with restrictions on new investments combined with import controls.
Economy
Competitiveness in International Markets Canadian export related emissions would not be subject to a fossil fuel tax.  The primary disadvantage for Canadian exports may be slightly higher energy costs related to low emission energy. If markets for exports adopted an emission taxation system similar to this option, Canadian exports would have a considerable long term advantage, since Canada stands to have better access to large amounts per capita of low emission energy than any other country in the world. Canadian export related emissions would be subject to a Canadian fossil fuel tax. If markets for Canadian exports did not tax fossil fuel emissions in a similar way, Canadian exporters would be at a price disadvantage because of the emission tax. If export markets relied on fossil fuels without any form of taxation, Canadian exports might face higher energy costs. Prohibitions against certain exporters or export lines who have no alternative to emissions, or who have alternatives that are prohibitively costly, would cause emitters to go bankrupt and block investment in those business lines. No advantage or disadvantage to Canada, since other jurisdictions would establish regimes similar to Canada's. No advantage or disadvantage to Canada, since other jurisdictions would establish regimes similar to Canada's. No advantage or disadvantage to Canada, since other jurisdictions would establish regimes similar to Canada's. Could be disadvantageous to Canadian manufacturers if actual process controls put Canadian exporters at a disadvantage relative to their foreign competitors. No advantage or disadvantage to Canadian manufacturers if actual product controls are introduced with long lead times. No advantage or disadvantage to Canadian exporters if the policy simply blocks future investments in fossil fuel industries. Short term supply restrictions could push up energy costs to exporters in Canada in the absence of price controls.
Competitiveness in Canadian Markets Canadian domestic markets would be protected against products containing high emission levels in their manufacture and transportation (e.g. China). Canadian manufacturers selling in Canada would be at a price disadvantage, since their products would carry an emission tax on their products while products of their competitors would not. Prohibitions against certain emitters or business lines who have no alternative to emissions, or who have alternatives that are prohibitively costly, would cause emitters to go bankrupt and block future investment in those business lines. No advantage or disadvantage to Canada, since other jurisdictions would establish regimes similar to Canada's. No advantage or disadvantage to Canada, since other jurisdictions would establish regimes similar to Canada's. No advantage or disadvantage to Canada, since other jurisdictions would establish regimes similar to Canada's. Could be disadvantageous to Canadian manufacturers if actual process controls put Canadian manufacturers at a disadvantage relative to their foreign competitors. No advantage or disadvantage to Canadian manufacturers if actual product controls are introduced with long lead times. No advantage or disadvantage to Canadian manufacturers if the policy simply blocks future investments in fossil fuel industries. Short term supply restrictions could push up energy costs to manufacturers in Canada in the absence of price controls.
Energy Industry The fossil fuel tax would significantly curtail fossil fuel production for domestic markets. Export markets would be unaffected, as emissions related to fossil fuel production in Canada would not be taxed. The decline of the fossil fuel industry from the loss of domestic markets would be offset by the development of alternative energy businesses and related employment. The fossil fuel tax would significantly curtail fossil fuel production for domestic markets. Emissions related to fossil fuel exports would also be subject to tax. It is unclear whether the higher taxes would affect exports. The decline of the fossil fuel industry from the loss of domestic markets would be offset by the development of alternative energy businesses and related employment. No impact, unless fossil fuel industries were subject to the prohibition of emissions. To the extent that fossil fuel industries would be affected negatively, other energy businesses would emerge to fill the gap. The fossil fuel industries would presumably be subject to the cap, and would be forced to cut emissions in line with their cap. This would likely make them more emission-efficient in producing, refining and transporting fossil fuels. The caps in other lines of business would likely reduce demand for fossil fuels. This would lead to a decline in markets for fossil fuels, and the industry itself. Alternative energy businesses would emerge to fill the gap. The fossil fuel industries would presumably be subject to the cap, and would be forced to cut emissions in line with their cap. This would likely make them more emission-efficient in producing, refining and transporting fossil fuels. The caps in other lines of business would likely reduce demand for fossil fuels. This would lead to a decline in markets for fossil fuels, and the industry itself. Alternative energy businesses would emerge to fill the gap. The fossil fuel industries would presumably be subject to the cap, and would be forced to cut emissions in line with their cap. This would likely make them more emission-efficient in producing, refining and transporting fossil fuels. The caps in other lines of business would likely reduce demand for fossil fuels. This would lead to a decline in markets for fossil fuels, and the industry itself. Alternative energy businesses would emerge to fill the gap. Process controls applied to the fossil fuel industry (e.g. strengthened controls over flaring and venting and the release of volatile organic compounds in refineries)could limit the ability of the industry to produce or make production more expensive relative to alternative energy businesses. Process controls applied to other business lines could reduce the demand for fossil fuels, and create opportunities for alternative energy businesses. Product controls applied for fossil fuel products could limit markets for these products and cause a decline in the industry. Alternative energy businesses would emerge to fill the gap. Fossil fuel supply restrictions would hurt fossil fuel industries, but create opportunities for alternative energy businesses.
Fairness This option is inherently fair. The burden of the taxation would fall on those consumers of emissions, specifically individuals who either emit themselves, or who purchase goods and services that incorporate emissions. This option is unfair to Canadian manufacturers trying to sell into foreign markets, or facing competition from foreign producers, since the products of Canadian manufacturers would face a fossil fuel tax. This option is unfair to businesses subject to the prohibition, unless there is ample warning to allow a reasonable period to recoup investments. This option is unfair to businesses subject to the cap who have Canadian or foreign competitors not subject to the cap. Normally, businesses subject to the cap would be large businesses, so small businesses would get an unfair advantage. It could also be unfair to businesses that have problems getting under the cap. This option is unfair to businesses subject to the cap who have Canadian or foreign competitors not subject to the cap. Normally, businesses subject to the cap would be large businesses, so small businesses would get an unfair advantage. It could also be unfair to businesses that have problems getting under the cap. This option is unfair to businesses subject to the cap who have Canadian or foreign competitors not subject to the cap. Normally, businesses subject to the cap would be large businesses, so small businesses would get an unfair advantage. It could also be unfair to businesses that have problems getting under the cap. This option is unfair to businesses subject to process controls. The unfairness could be mitigated by long lead times from the initial warning of process controls to the implementation of the controls. This option is unfair to businesses whose products are subject to product controls. The unfairness could be mitigated by long lead times from the initial warning of product controls to the implementation of the controls. This option might be perceived as unfair to the fossil fuel industry, although this industry has benefited from lack of emissions controls and has a long lead to adjust.
Administrative Costs There would be no additional annual administrative costs, since the fossil fuel tax would essentially replace the Goods and Services Tax or the Harmonized Sales Tax. Start up costs would be relatively minor. There would be no additional annual administrative costs, since the fossil fuel tax would essentially replace the Goods and Services Tax or the Harmonized Sales Tax. Start up costs would be relatively minor. Administrative costs would involve the compliance monitoring and enforcement related to the prohibition. Costs would depend on the nature and extent of the prohibition, and the incentives and disincentives related to compliance. Where the extent of the prohibition and incentives for non-compliance are both high, administrative costs would also be high. Administrative costs would involve costs related to setting the cap, addressing appeals related to the cap, compliance monitoring and enforcement related to the cap. Costs would depend on the way the cap is set (i.e. a broad general rule such as a few percent less per year versus negotiated caps on a line-of-business basis), extent of the cap (all businesses versus selected larger businesses), and the incentives and disincentives related to compliance. Generally, monitoring a cap is more difficult than monitoring a prohibition. Where incentives for non-compliance are both high, administrative costs would also be high. Administrative costs would be similar to administrative costs in the previous option, but higher because of the need to monitor and enforce the trade in emission caps. Administrative costs would be similar to administrative costs in the previous option, but higher because of the need to approve offset projects, monitor the projects to ensure they generate the required offsets, enforce situations where there is non-compliance with offset rules, and manage offset trading. Administrative costs would include establishing process controls and standards (including related negotiations), dealing with appeals, monitoring processes, and enforcing non-compliance with controls and standards. Generally process management is technical, and requires skilled employees and site visits, both of which would add to administrative costs. Administrative costs would also depend on the extent of process controls; the more widespread process controls, the higher the administrative costs. Administrative costs would include establishing product controls and standards, monitoring products, and enforcing non-compliance with controls and standards. Administrative costs would also depend on the extent of product controls; the more widespread the controls, the higher the administrative costs. Administrative costs are likely to be very high, since supply management implies working against basic market forces across the Canadian economy. Attempts to restrict production and limit imports will put prices up, and create windfall profits. Administrative costs will arise as governments attempt to capture some of the windfall.

Options: Two options not included in the options in this analysis are government-encouraged voluntary initiatives and government expenditure programs.
(1) Canada has attempted government-encouraged voluntary initiatives such as the one tonne challenge and information programs on energy consumption. While these initiatives may have influenced the behaviour of some Canadians, they were not sufficiently powerful to induce the necessary transformation of Canada's economy. Nevertheless, one anticipates that voluntary initiatives will continue, based on modest government support. As such, they are not included here as a key new policy option.
(2) Canada has also tried to reduce greenhouse gas emissions through government expenditures on research, carbon capture and storage pilot projects and other demonstration initiatives, home retrofit programs, etc. These programs are now included in government fiscal frameworks, and are expected to continue. As such, they are not included here as a key new option.

Tax Driven Market Incentives: These options impose a tax on emissions, making it more costly to emit. The increased cost of emissions are expected to reduce activities by corporations and individuals that cause emissions. Any tax on emissions must be revenue neutral i.e. replaces existing taxes (e.g. the Goods and Services Tax, import duties, provincial sales taxes, the Harmonized Sales Taxes in several provinces, personal income taxes, and corporate income taxes) rather than imposes new ones. An emissions tax should in theory cover key greenhouse gas emissions (carbon dioxide, methane, nitrous oxide, and chlorofluorocarbons). Given problems related to measuring and monitoring emissions other than carbon dioxide, the initial target would be fossil fuel emissions.

Industry Regulatory Controls: These options seek to influence the behaviour of corporations through direct controls. The combination of legislation and regulations either dictate behaviours, or prohibit behaviours, and include compliance monitoring, enforcement and penalties for non-compliance. The most obvious regulatory control are emission controls. Other types of controls would cover processes used (on the assumption that process controls would lead to reduced emissions) and product controls, which would restrict the types of products available and essentially ban products that cause emissions or reduce emissions from classes of products.

Diminishing Fossil Fuel Supplies: This option uses a combination of Canadian production and import restrictions to reduce the amount of fossil fuels available in Canada. Restrictions on the available fossil fuels would lead to emission reductions related to the combustion of fossil fuels. Since it would make little sense for Canada to reduce the production of fossil fuels intended for Canadians and then allow their export, this option would normally include export controls. Reducing the short-term supply of fossil fuels below market demand would normally put up prices, and create windfalls to the oil and gas industry. Governments would consider measures to prevent this, including income and other taxes on the oil and gas companies, direct investment in fossil fuel distribution, rice controls and allocation regimes to prevent the oil and gas industry from getting windfalls combined with efforts to suppress the inevitable black markets. Reducing fossil fuels available to Canadians in the long term could be achieved by stopping investment in exploration, tar sand development, distribution and refining fossil fuels, as well as import restrictions.

Fossil Fuel Tax on the Canadian Consumption of World Wide Emissions: Canadian consumers would pay the tax on fossil fuels combusted in Canada whether the fossil fuels were produced in Canada or imported, as well as on the combustion of fossil fuels embedded in products imported into Canada and their shipping costs.

Fossil Fuel Tax on Emissions in Canada: Canadian producers would pay the tax on fossil fuels produced for combustion, even when the products they produce are exported. Imports of fossil fuels would not be taxed. The tax is in essence a tax on the production of emissions in Canada. The option is in line with the Kyoto Protocol, which focuses on emissions produced within national borders.

Fossil Fuel Emission Controls: This options attempts to reduce emissions through industrial regulatory controls, including prohibition of emissions from certain activities as well as allowing but controlling emissions below the level that would otherwise occur.

Process Controls: Process controls affect the way particular activities are carried out, on the premise that some production processes cause more emissions than others and should be either limited or banned. Processes potentially subject to control include the combustion of fossil fuels from stationary sources for energy production, industrial processes that are not related to the combustion of fossil fuels (e.g. making cement or electronic components), the production of oil and gas (specifically venting and flaring), the handling of manure from the livestock industry, the management of waste sites on land, and the feeding of beef cattle (which produce methane).

Product Controls: Product controls seek to reduce emissions indirectly by prohibiting particular products that emit greenhouse gases (gas furnaces, gas barbecues), or reducing the emissions from classes of products that emit greenhouse gases (e.g. smaller and lighter passenger vehicles, or increased percentage of electric vehicles sold by manufacturers).

Prohibit Emissions: This option makes emissions, or certain types of emissions, illegal. While prohibition may make sense in some situations (e.g. frivolous emissions), in most cases, an outright prohibition on greenhouse gas emissions would be impractical.

Cap But Allow Emissions: This approach allows emissions, but puts a limit on them. Over time, the limit would decrease and Canadian emissions would fall. The approach requires that the government would be able and willing (1) to set a sensible and fair cap on specific entities, (2) to reduce the cap over time on a sensible basis (and presumably allowing for growth), (3) to monitor emissions from regulated entities to ensure compliance with the cap, and (4) to take enforcement action where their is non-compliance. This approach carried out over the entire economy would be practically impossible, so the option implicitly assumes some limit on entities subject to the cap. The federal government appears initially interested in limiting the entities to facilities (not individuals or corporations) with emissions over 50,000 tonnes CO2 per year (a.k.a. "large emitters"). Canada's large emitters would be at a significant disadvantage to their international competitors if they were subject to emission caps, while their international competitors were not. To mitigate this problem, the option normally entails an "international" solution involving at least Canada's principle trading partner, the United States. There are a variety of ways to implement this cap. Options include (1) setting varying caps by line of business of the facility versus setting one cap for all lines of business, (2) applying regular cap reductions on a pre-set formula basis versus trying to establish annual cap reductions presumably based on consultations, negotiations and/or analysis, (3) allowing regulated entities to have appeal mechanisms related to their caps versus no appeal mechanisms, (4) imposing stiff penalties versus weak penalties for non compliance.

No Trade in Emission Savings Below the Cap: A regulated facility is given a cap. The regulatory regime provides no regulatory advantage in emitting below its cap. However, if it has commercial or other non-regulatory reasons for doing so, it may go below its cap.

Carbon Trading: This option includes two sub-options. One involves the sale of carbon emissions by facilities that have beaten their caps in a particular time period, presumably to companies that will not beaten their caps. The other expands carbon emission trading to include other projects that have the ultimate effect of reducing emissions.

Trade in Emission Savings Below the Cap: Where a regulated facility can reduce emissions below its cap, the facility can get a reward "cap space" to another entity. The expectation is that a market would develop in tradeable carbon emissions.

Trade in Emission Savings Below the Cap Plus Offsets: Apart from facilities subject to emission cap regulations, there are other entities that are carrying out, or could carry out, activities that reduce greenhouse gases in the atmosphere. These entities could be planting trees that remove carbon dioxide from the atmosphere, developing emission reduction technologies, developing renewable resource power sources, and the like. This option allows those facilities that cannot meet their emission caps to invest in these other entities and their emission reduction projects. In essence, an entity that cannot meet its emission targets can escape penalty by investing in other projects that reduce emissions or in paying facilities with emission cap space for their unused allowable emissions.

Issues

EffectivenessThe goal of emissions reduction options is to reduce emissions. Effectiveness is a measure of how well each option fulfills this goal. Overall effectiveness in turn is based on three considerations.
(1) Emission reduction coverage : This refers to the percentage of Canada's emissions covered by the option. Coverage percentages are based on Canada's emissions over the period 2003 to 2005. Note that no option addresses all of Canada's emissions, and some options address more emissions than others. Because of this, a truly effective strategy to reduce emissions will need to include a combination of policy options.
(2) Emission reduction efficiency within the emission coverage. This means the efficiency of the option in reducing or eliminating the emissions covered by the option. Not all options are equally effective.
(3) Implementation timing. Some options can be implemented by Canada almost immediately upon creation of the appropriate legislative and regulatory framework. Other options require actions in concert with the United States and perhaps other countries. With regard to the United States, it is uncertain when, if ever, the required actions will occur. As climate change requires immediate action, options that take a long time to initiate are less effective than options that can be initiated in the near future, and should be discounted appropriately.

Carbon Tax Rate Calculation: In 2006, Canada's governments raised $318.5 billion through the goods and services tax, harmonized sales taxes, provincial sales taxes, other consumption taxes other than gasoline and motive fuels, and come taxes. From 2003 to 2005, Canada's greenhouse gas emissions from the energy sector average 610 million tonnes of carbon dioxide equivalents. Replacing Canada's various taxes with a revenue neutral carbon tax would require an initial carbon tax rate of $522.13 per tonne of emissions, or $0.52 per kilogram of carbon dioxide equivalents, or $1.25 per litre of gasoline (2.4 carbon dioxide equivalents per litre), or $1.01 per cubic metre of natural gas (1.932 carbon dioxide equivalents per cubic metre).

Economy: In the long-term, one can expect:
(1) The economic well-being of Canadians will be determined primarily by factors such as the extent to which the Canadian society is organized productively, the quality of education, the innovation, and willingness to work hard and invest in Canadian production.
(2) In the absence of climate-driven restrictions on the combustion of fossil fuels, in the long term, there will be ample coal to meet demand, there may be sufficient natural gas although this is uncertain, but the planet will be running out of oil. This will have significant implications for transportation and trade. Shipping costs by truck, ship and air will rise significantly, forcing an end to globalization (bad news for Canadian resource industries and grain producers that currently function globally)and bringing production closer to final demand (good news for Canadian manufacturers). An end to globalization also means greater trade relations with the United States and perhaps Central and South America and less with China, India and other Asia and European countries.
(3) At least some nations (especially Europe) will take emission reduction seriously, likely leading to rewards for low emission producers of goods and penalties for high emission producers. This means trade barriers to high emission countries or products.
(4) No other major country will have Canada's potential access to non-fossil fuel energy per capita. This potential is based on a vast country, a relatively small population, uranium resources and a sophisticated developed economy. In a low emission markets, Canada should have decided advantages, if it chooses to go toward a low emission economy.

In pursuing an emission reduction strategy, Canada will already have accepted the possibility that Canadians may be paying more for energy (but probably not that much more), and with more income expended on energy, they will have less funds (but not that much less) for other things. This is the price Canadians will pay for a relatively stable climate, and minimal adverse climate change impacts.

Within this broad context, the policy options to reduce emissions have differences in terms of economic impact, particularly in relation to competitiveness of Canadian industries in international and domestic markets, and to impacts on Canada's energy industry.

Fairness: Fairness is based on the principal of equal treatment. Fairness is relevant in terms of acceptability of a policy option by the Canadian public. It is also relevant when it comes to compliance with the policy option. Canadians generally and regulated entities within Canada may not comply with measures perceived as unfair.

Administrative Cost: These are the costs to government of establishing a policy, setting or negotiating behavioural standards if necessary, making regulated parties aware of the policy and standards, monitoring the policy for non-compliance, and taking enforcement action when there is non-compliance.

Created: 2010-09-23

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