The cost of carbon pricing in Ontario and Alberta

January 9, 2017 at 12:19 pm Leave a comment

rebate_figureClaims that carbon pricing will lead to skyrocketing price increases throughout the economy are misplaced at best—and misleading at worst.

On January 1, Ontario and Alberta adopted broad-based carbon pricing policies. Alberta opted for a carbon tax while Ontario chose a cap-and-trade system. Alberta’s carbon tax is $20/t of carbon dioxide in 2017, while permits in Ontario’s cap and trade system currently trade at about $18/t of carbon dioxide.

In these early days of carbon pricing, detailed empirical analysis is necessarily limited. Our brief analysis shows that the direct effect of carbon prices will be about $150 (Ontario) to $200 (Alberta) per year for an average household. The indirect effect on carbon pricing on the goods and services we buy will be on the order of $100 for the typical household in 2017. Of course, even modest cost increases may be challenging for many households but rebates can effectively mitigate these concerns. In Alberta, lump-sum rebates will be sufficient to ensure low- and middle-income households aren’t (on average) made worse-off by carbon taxes. Ontario meanwhile has no explicit support program, but has a variety of other initiatives.

Read The cost of carbon pricing in Ontario and Alberta by Trevor Tombe and Nicholas Rivers at Macleans.ca.

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Entry filed under: Carbon_Emissions, Economy, Finance.

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