Carbon Pricing in Canada: A Performance Review
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The purpose of this major research paper is to examine the effectiveness of carbon pricing systems, in terms of their political longevity and their environmental robustness. It aims at comparing carbon taxes with cap-and-trade regimes in the Canadian context, to investigate which one of these two approaches can withstand electoral political change, and to assess whether such systems can result in GHG emission reductions. The research also examines the possibility of the simultaneous implementation of carbon taxes and cap-and-trade mechanisms. Furthermore, it explores whether carbon pricing systems could be implemented with other climate change mitigation policies. In addition, it identifies limitations and trade-offs that the implementation of carbon pricing faces. Finally, it provides policy recommendations for advancing such systems in Canada in particular. The paper contributes, as well, to the understanding of whether carbon taxes really make sense by highlighting the economics of emissions reduction and turning the spotlight on the welfare analysis of negative externalities.