A Proposal for a Market Mechanism for Carbon Reduction

Adriana Mugnatto-Hamu January 5, 2009

This is a proposal for a Canadian Cap and Dividend plan, a market-based mechanism for reducing emissions from fossil fuels that combines the best qualities of the proposals promoted by Canadian political parties interested in meeting internationally recognized emissions reductions targets.  Like the Carbon Tax, it is economy-wide and revenue-neutral.  It also addresses concerns raised about the Carbon Tax.  Canadian Cap and Dividend is inherently generous to Canada's most vulnerable citizens and it guarantees a firm cap on carbon emissions.  It is also likely to be more politically palatable in a recession period because it does not necessarily raise the price on fossil fuels.  It is easily compatible with the existing EU Cap and Trade system and with the Cap and Trade system proposed by the Obama administration in the United States.

Canadian Cap and Dividend is an elaboration of the Cap and Dividend plan developed by Peter Barnes. In essence, the mechanism involves establishing a firm and decreasing cap on all emissions, auctioning off allowable permits to be applied at source (mine face, well-head or import point), and distributing the proceeds equally to all adults in Canada.

It is hoped that this proposal will lead to a productive collaboration between political parties to help introduce a market mechanism that we urgently need to bring Canada in line with our international commitments to greenhouse gas emissions reductions.

Topics