Endnotes

1 Each reference to carbon in this report implies changes in the level of all greenhouse gases specified in common units of CO₂e (carbon dioxide equivalent).

The federal government’s commitment for 2050 is 60% to 70% below 2006 levels; the NRTEE’s analysis in our Getting to 2050 report took the mid-point— 65% below current levels—as does this report.

3 Please refer to section 2.2 in the background technical report for more information on our modelling and assumptions.

4 Ideally, the policy would seek to maximize environmental benefits while minimizing costs, however, by using the environmental targets already set by the government, we are able to focus on minimizing costs to meet those targets.

5 We recognize that the cost-effectiveness indicator is not relevant for setting emission reduction targets. Instead, the preferred target setting approach would be to minimize total abatement costs while maximizing cumulative emission reductions between now and 2050.

6 A measure of consumer satisfaction related to consumption and leisure time, but not including benefits related to stabilizing climate or reducing CO2 emissions

7 A stranded asset is an asset whose market value is less than its book value because it has become obsolete before the completion of its depreciation schedule.

8 All prices are in 2006 Canadian dollars.

9 Large emitters are companies that produce goods in emissions-intensive sectors, including primary energy production, electricity production and selected areas of mining and manufacturing production.

10 Note: the remaining emissions are fugitive emissions from agroecosystems, waste, and solvents. Some of these are dealt with in the discussion on complementary regulations and technology policies.

11 Note, however, that higher costs were required in the medium term to account for the lower long-term price (i.e., with an expectation of a lower carbon price in the future, less abatement in the short term occurs, so the carbon price must rise to hit the same target).

12 Poorly-functioning offset systems can create “hot air” credits that do not represent real and additional reductions.

13 The NRTEE first introduced the “wedge” concept in its 2006 Advice on a Long-term Strategy on Energy and Climate Change. While the focus of that note was broadly based on the technology wedge concept developed by Socolow and Pacala (2004), this report has built on that model but instead uses policies, not technologies, as the basis for the wedges.

14 Discounted to $2006 using a discount rate of 8%. This rate reflects Government of Canada standard practice on discounting, with observed discount rates published in the Canada Gazette ranging from 6% to 10%.

15 The proposed intensity-based systems under the Government of Canada’s Regulatory Framework and Alberta’s operational Specified Gas Emitters Regulation, for example, do not allocate emissions, but instead use sector benchmarks to set performance standards based on emissions and production. Other proposed systems, like the Western Climate Initiative and US congressional initiatives, allocate permits
initially, most likely based on emissions, and then move to full auction where allocations are not required. Since the Regulatory Framework has not been officially abandoned and a potential cap-and-trade system with the US is neither official nor agreed to by either the US or Canadian governments at this time, our carbon pricing policy takes both of these situations into account. It is designed to either transition from the currently proposed intensity-based system to a hard cap by 2015, or shift sooner to an absolute cap-and-trade system in preparation for eventual linkage with a US system.

16 This allocation method sends a muted price signal through product prices, and so conservation is not fully prompted.

17 Discounted to $2006 using a discount rate of 8%. This rate reflects Government of Canada standard practice on discounting, with observed discount rates published in the Canada Gazette ranging from 6% to 10%.

18 Discounted to $2006 using a discount rate of 8%. This rate reflects Government of Canada standard practice on discounting, with observed discount rates published in the Canada Gazette ranging from 6% to 10%.

19 Discounted to $2006 using a discount rate of 8%. This rate reflects Government of Canada standard practice on discounting,
with observed discount rates published in the Canada Gazette ranging from 6% to 10%.

20 The value of remaining emission times the permit price of $100 in 2020.

21 This is likely conservative since we have assumed international purchases are at a price comparable to the $200 price ceiling. If international purchases were lower cost, the forecast savings would be higher. We have also not included large emitter trade with
the US or Europe, which could further lower costs through permit sales and purchases.

22 This implies a drop in growth of about 0.3% annually, which means these sectors would be about 7% to 8% smaller in 2050, relative to what they would have been with no carbon pricing policy in place.

23 As defined by Statistics Canada, personal disposable income is the amount of income individual Canadians and unincorporated businesses have left over after they have paid their income taxes and social security contributions. This is different from total personal income, which is calculated before income taxes are deducted. Disposable income consists of all wages and salaries received by persons, self-employed and other unincorporated business income, interest and dividend income received by persons, plus unemployment insurance benefits and other transfers paid from governments to persons, minus income taxes (but not customs or sales taxes on commodities) and social security premiums paid to governments.

24 Discounted to $2006 using a discount rate of 8%. This rate reflects Government of Canada standard practice on discounting, with observed discount rates published in the Canada Gazette ranging from 6% to 10%.