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A gravity model of softwood lumber (SWL) trade is developed and used to determine the effect that U.S. tariffs have on SWL exports from Canada to the U.S. The gravity model employs quarterly data for seven Canadian and three U.S. regions over the period 2007–2019; it is expanded to include Japan and China as separate regions, and then as a combined China-Japan region. The effect of a Canadian export tax or U.S. import tariff is examined using information on the Softwood Lumber Agreement (effective from 2006 to 2015), which included a trigger mechanism that varied the tax/tariff. The gravity model was estimated for trade quantity and value using OLS and a Poisson Pseudo-Maximum-Likelihood estimation method for different configurations of the China-Japan export regions. Our findings indicate that (1) the imposition of a countervail and/or anti-dumping duty usually has a negative effect on Canada’s physical exports, but not in all cases; (2) the value of softwood lumber trade decreases by 0.054% on average with each 1% increase of tax/tariff; (3) the tax/tariff has a significant impact on Canadian exports when China and Japan are included; and, not surprisingly, (4) duties affect the value of lumber exports to a much greater extent than quantity.

This study examines how natural disturbance can adversely affect the carbon sequestration potential of the forest, and the potential contribution that genomics might make towards offsetting these impacts when carbon is priced. A stochastic dynamic programming model of the BC interior, which includes a detailed carbon accounting module, shows that harvests are delayed as carbon prices rise, with less carbon stored in harvested wood products and more in the forest ecosystem, but an increase in the risk of natural disturbance causes the landowner to harvest sooner. As natural disturbance increases in prevalence and severity, this will somewhat offset the lengthening of rotation age that occurs when carbon is priced. With disturbance, the total amount of carbon sequestered falls significantly, but some of this can be recovered through proactive planting of genetically modified (GM) stems that are more productive and less susceptible to disturbance. To make such an investment worthwhile, however, the costs of planting GM stock should not exceed $120–$150/ha. Finally, this study suggests that a modest price of carbon (somewhat less than $25/tCO2) can be an effective incentive to encourage land owners to reduce the rotation age brought about by disturbance, and generate additional carbon offsets.

The REPA spatial price equilibrium model developed in Chapter 4 is used to investigate the regional welfare impacts of a quota on exports of Canadian softwood lumber to the U.S. In the model, Canada is divided into seven regions and the U.S. into five regions, with the rest of the world constituting a 13th region; the model is calibrated to the bilateral trade flows that existed in 2016 when there was free trade in lumber. Various quota levels are examined in terms of their impact on producers and consumers in both countries. Canadian producers are found to be better off with a hard quota compared with free trade, although the quota leads to a reduction in market share while driving a wedge between Canadian and U.S. prices, both of which are aggravated with harder quotas. Overall, the loss of export sales to the U.S. is not recouped with sales to the rest of the world. The REPA model is also used to examine the impact of EU demand for wood pellets to generate electricity. Results indicate that pellet prices will approximately double.

A gravity trade model can be used to determine the effects of policy on bilateral trade flows. The gravity model is initially explained and then used to determine the effect that U.S. tariffs have on softwood lumber (SWL) imports from Canada, using information from the 2006 Softwood Lumber Agreement. Quarterly data for seven Canadian and three U.S. regions for the period 2007-2017 are used to estimate a gravity model of SWL trade. The model is subsequently expanded to include Japan and China as separate regions, and then as a combined China-Japan region. The model is estimated using OLS and a Poisson Pseudo-Maximum-Likelihood method for trade quantity and value. Findings indicate that: (1) the imposition of a countervailing and/or anti-dumping duty usually has a negative effect on Canada's physical exports, but not in all cases; (2) the value of softwood lumber trade decreases by 26% on average under a tax/tariff compared with no duties; (3) the tax/tariff has a smaller but still significant impact on Canadian exports when China and Japan are included, as SWL exports are diverted from the U.S.; and, not surprisingly, (4) duties affect the value of lumber exports to a much greater extent than quantity.

In this chapter, we examine the importance of softwood lumber production to Canada's economy and provide a brief history of the Canada-U.S. softwood lumber dispute and its resolution on various occasions using U.S. countervailing and anti-dumping duties, export taxes or various types of quota regimes, including tariff rate quotas. The construction of excess supply and demand functions is explained, as are the gains from trade. This helps inform the modeling approaches that are identified in later chapters.

Mitigating climate change will require reduced use of fossil fuels to generate electricity. To do so while eschewing nuclear power, countries have turned to wind and solar energy. In this paper, load duration and screening curves are used to investigate the extent to which a jurisdiction should invest in intermittent (solar and wind) sources of energy, gas and nuclear power. The application is to the Alberta electricity grid because it is nearly 90 percent reliant on fossil fuels, particularly coal, and recent policy intends to eliminate coal generating capacity by 2030 and replace two-thirds of the lost capacity with renewables. Results suggest that solar and wind are unable to replace two-thirds of coal generation, and that larger than anticipated investments in natural gas capacity will be required. However, if Alberta is serious about reducing emissions, it will need to rely on nuclear energy; at high carbon prices, nuclear power could reduce CO2 emissions by some 95% compared to only 55% when relying totally on solar and wind.

Central banks are increasingly communicating their economic outlook in an effort to manage the public and financial market participants’ expectations. We provide original causal evidence that the information communicated and the assumptions underlying a central bank’s projection can matter for expectation formation and aggregate stability. Using a between-subject design, we systematically vary the central bank’s projected forecasts in an experimental macroeconomy where subjects are incentivized to forecast the output gap and inflation. Without projections, subjects exhibit a wide range of heuristics, with the modal heuristic involving a significant backward-looking component. Ex-Ante Rational dual projections of the output gap and inflation significantly reduce the number of subjects’ using backward-looking heuristics and nudge expectations in the direction of the rational expectations equilibrium. Ex-Ante Rational interest rate projections are cognitively challenging to employ and have limited effects on the distribution of heuristics. Adaptive dual projections generate unintended inflation volatility by inducing boundedly-rational forecasters to employ the projection and model-consistent forecasters to utilize the projection as a proxy for aggregate expectations. All projections reduce output gap disagreement but increase inflation disagreement. Central bank credibility is significantly diminished when the central bank makes larger forecast errors when communicating a relatively more complex projection. Our findings suggest that inflation-targeting central banks should strategically ignore agents’ irrationalities when constructing their projections and communicate easy-to-process information. Electronic supplementary material The online version of this article (10.1007/s10683-020-09684-6) contains supplementary material, which is available to authorized users.