NCPA - National Center for Policy Analysis


November 14, 2005

With the ratification of the Kyoto Protocol, Canada promised to reduce its average greenhouse gas (GHG) emissions between 2008 and 2012 by 6 percent (or 270 megatons), but living up to these obligations will impose major economic changes for Canadians, says the Fraser Institute.

The government promises that the protocol will give Canada a competitive advantage among developed countries, will make cities more comfortable and will improve the quality of living; however, the costs associated with achieving the proposed target are unknown, says Fraser.

According to several different studies:

  • A review of sectoral impacts of compliance found that the associated costs would rely significantly on whether Canada can buy "emission credits" on the international market; if they can, compliance cost is estimated at 0.5 percent of annual GDP (that's $6.47 billion Canadian dollars), if they can't, the cost will jump to seven percent.
  • In 2003, G. Cornelis van Kooten found that the protocol was likely to fail because it has too many loopholes, inadequate governance structures and insufficient compliance provisions.
  • Mark Jaccard of the Simon Fraser University concluded that if a GHG cap and trade permit system is implemented, final energy prices would increase between 10 and 100 percent for electricity, 60 percent for natural gas, and 50 percent for gasoline, resulting in a reduction of cumulative economic growth of three percent by 2010.
  • Cornell University's Neha Khanna found that Canada will experience a GDP loss between 9.33 percent and 14.7 percent of 2010 baseline.

Even though there is no consensus on the magnitude of the cost of complying with Kyoto, there is a consensus that these efforts will significantly compromise the economy and Canadian's standard of living, says Fraser.

Source: Jeremy Brown and Milagros Palacios, "The Kyoto Protocol: Economically Beneficial or Detrimental?" Fraser Forum, October 2005; based upon: G. Cornelis van Kooten, "Smoke and Mirrors: The Kyoto Protocol and Beyond," Canadian Public Policy, Vol. 29, No. 4, 2003; Mark Jaccard, "Canada's Technological and Behavioral Potential," Canadian Journal of Policy Research, Vol. 2, No. 4, Winter 2001; and Neha Khanna, "Analyzing the Economic Cost of the Kyoto Protocol," Ecological Economics, vol. 38, no. 1, July 2001.

For van Kooten text:

For Khanna text:


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