Climate Change Plans for Canada: a Full Cost-Benefit Framework for Evaluating Options at the Provincial Level

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This paper examines the provincial economic impacts from implementing the Kyoto Protocol in Canada under two policy options currently being considered by the federal government: the Broad-as-Practical and Reference-Package options. Using information from federal documents and academic literature, we find that the federal forecasts of undiscounted GDP losses to provincial economies represent misleading indicators of true economic impacts. We suggest that a more accurate provincial impact analysis of GHG policy options would be based on a net present value framework that incorporates discounted costs and ancillary benefits over the time-frame of the program. Once these elements are accounted for, we find that most provinces would benefit under both policy options, and would prefer the Reference-Package. Specifically, the Reference-Package option reduces provincial burdens of achieving Canada's Kyoto commitment, and may do so at virtually no net efficiency cost relative to the Broad-as-Practical option. These findings emphasize the importance of incorporating both market and non-market values into the policy-making arena.