Marginal abatement costs for GHG emissions in Canada: a shadow cost approach.

This study approximates the marginal abatement costs (MACs) of reducing GHG emissions in Canada using the shadow cost approach. Utilizing industry level data, we are the first to offer Canadian estimates based on a Hyperbolic Output Distance Function (HODF) and the stochastic frontier estimation. Accounting for GHG emissions caused by energy consumption, we obtain an average shadow MAC of $130/t across 30 industries. In the GHG-intensive industries such as the electric utilities and non-conventional oil extraction, MACs are lower than the CO₂ levy of $50/t imposed by the federal government. Since these low-MACs sectors account for about 98 per cent of total GHG emissions and 94 per cent of total energy use in industries studied, the envisaged $50/t carbon levy could notionally result in a significant GHG abatement in Canada. [ABSTRACT FROM AUTHOR]