Environmental, economic, and social impact of five COP26 policies: A computable general equilibrium analysis for Canada

Abstract

AbstractAlong with the main objective of politicians, other economic variables are variously affected by the environmental taxes, policies, and limitations like a price on pollution, clean electricity, the cap on emissions, methane emissions, and nature‐based solutions. The objective of the environmental solutions is to decrease pollutant emissions and energy consumption while reducing labor costs and taxes as the incentives for creating new occupations. An overall equilibrium model was considered in the present study as a nonlinear equations system, which was calibrated for the reference year of 2018 utilizing Canada's economy's data table. The effects of utilizing these environmental policies considered by Canada in COP26 are examined. In all scenarios, minimum, maximum, and optimum values for reducing pollutant emissions are calculated under these policies. According to the simulation results, welfare is reduced by the price of pollution policy. Moreover, the actual consumed budget of the household is reduced by 8%. However, such indices will be incremented by 2% in the nature‐based policy. In all scenarios, the gross domestic product is decreased. However, in the methane emission policy, this reduction is 1.05% in the lowest state. In all scenarios, the consumer price index will be incremented by 3.8%–9.8%. It is concluded that the clean electricity policy is an appropriate policy for reducing greenhouse gas emissions and at the same time adhering to international commitments.