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Published on Apr 5, 2016
Provinces need the portfolio of revenue recycling options that works best for them.
The primary objective of carbon pricing is to reduce greenhouse gas emissions. But the price is only half the story. Carbon pricing can generate substantial revenue for provincial governments. How this revenue is recycled back into the economy can affect both economic and environmental objectives. This report focuses on the costs and benefits of six revenue recycling options: transferring revenue to households; reducing existing tax rates; investing in emissions-reducing innovation and technology; investing in critical public infrastructure; reducing government debt; and providing transitional support to industry. As priorities differ across provinces, revenue-recycling choices will differ across the country. The authors conclude that household fairness and business competitiveness challenges can both be addressed with good policy, and therefore need not be an obstacle to designing and implementing carbon pricing policies.