Setting a Price on Carbon

How should a Canadian Government set a price for carbon? By legislation, such as a carbon tax? Or by a market based system, such as cap-and-trade ?

In the 2008 Federal Election a majority of Canadians rejected a carbon tax proposed by the Liberal Party.  After this defeat, Jim Prentice, then the Federal Minister of Environment, announced that a carbon market was an important building block in the Conservative Government’s climate change plan.

The market was based on a a cap-and-trade system.   The system would limit emissions of greenhouse gases but emitters would be able exceed the limits by purchasing offset credits to compensate for their excess emissions.  These rules were never finalized and the proposal was effectively dropped.

In October 2010 Prentice resigned from the Government and joined the CIBC.  His departure was never explained.

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