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Will Carbon Tax Constrain Oil Production in Canada?

  • I. Kopytin
  • A. Maslennikov
  • M. Sinitsyn
  • S. ZhukovEmail author
  • S. Zolina
Conference paper
Part of the Smart Innovation, Systems and Technologies book series (SIST, volume 138)

Abstract

The article aims to assess how introduction of carbon tax will impact oil production in Canada in the long run. Two oil exporting countries, Norway and Canada, introduced carbon tax in 1991 and 2018 respectively. In Norway carbon tax has not constrained oil production and development of costly hydrocarbon reserves in the Arctic areas. We build a simple econometric model for Canada’s oil demand and supply until 2040 in reference and low carbon scenarios. Carbon tax is explicitly inbuilt into the model based on the assumption that producers fully pass costs of carbon tax onto consumers of petroleum products. Demand is modelled bottom-up individually for economic sectors, including road transport, air transport, marine and water transport, industry, commercial sector, etc. On the basis of modelling results we argue that in the projection period carbon tax will have a minor constraining impact on oil production growth in Canada. Demand for petroleum products will contract more deeply compared to crude oil production. The continuously increasing export orientation of the Canadian oil sector will partially shield it from the carbon tax. Given the global advancement of low carbon paradigm, analysis of Norway and Canada experience with carbon tax is crucially important for all large oil producing countries.

Keywords

Carbon tax Canada Oil production Oil consumption Low carbon paradigm Stranded assets Unburnable oil 

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Copyright information

© Springer Nature Switzerland AG 2020

Authors and Affiliations

  • I. Kopytin
    • 1
  • A. Maslennikov
    • 1
  • M. Sinitsyn
    • 1
  • S. Zhukov
    • 1
    Email author
  • S. Zolina
    • 1
  1. 1.Primakov National Research Institute of World Economy and International Relations, Russian Academy of SciencesMoscowRussian Federation

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