An Open Letter from Economists on Canadian Carbon Pricing

Climate and Energy Pollution Technology and Innovation

As economists from across Canada, we are concerned about the significant threats from climate change. We encourage governments to use economically sensible policies to reduce emissions at a low cost, address Canadians’ affordability concerns, maintain business competitiveness, and support Canada’s transition to a low-carbon economy. Canada’s carbon-pricing policies do all those things.

There is plenty of discussion about carbon pricing in Canada today. Healthy public debate is good, but it should be based on sound evidence and facts. Let’s examine some of the claims made by critics of carbon pricing and compare them with what the evidence shows.

Critics’ Claim #1: Carbon pricing won’t reduce GHG emissions.

What the evidence shows: Not only does carbon pricing reduce emissions, but it does so at a lower cost than other approaches.

Since federal carbon pricing took effect in 2019, Canada’s GHG emissions have fallen by almost 8 percent, although other policies were also at work. A new report from the Canadian Climate Institute shows that federal and provincial carbon pricing, for industries and consumers, is expected to account for almost half of Canada’s emissions reductions by 2030.

The reason carbon pricing works is simple: when something costs more (in this case fossil fuels), people use less of it. That is basic economics, and common sense.

Carbon pricing is the lowest cost approach because it gives each person and business the flexibility to choose the best way to reduce their carbon footprint. Other methods, such as direct regulations, tend to be more intrusive and inflexible, and cost more.

That is not to say that carbon pricing should be Canada’s only climate policy. Other complementary policies are also needed. But the more we use the lowest-cost policies to achieve our climate goals, the more resources will be available for other important things—like health care, education and other social programs.

Critics’ Claim #2: Carbon pricing drives up the cost of living and is a major cause of inflation.

What the evidence shows: Canadian carbon pricing has a negligible impact on overall inflation.

The sharp increase in inflation between 2021 and 2023 was caused by several factors, mainly related to the COVID-19 pandemic (disrupted supply chains, rapid growth in the money supply, and pent-up demand), and the impact of the Russia-Ukraine war on commodity prices. These forces are global, which is why most advanced countries—whether or not they have a carbon price—experienced very similar inflation. According to the Bank of Canada, carbon pricing has caused less than 1/20th of Canada’s inflation in the past two years.

In addition, a central feature of the federal carbon price is that approximately 90 percent of the revenues generated are rebated back to households. Most families receive more money in rebates than they pay in carbon pricing, particularly those with low or medium incomes. Rural residents get an additional rebate. In other words, the policy is designed to ensure it does not raise the cost of living for most Canadians.

Climate change, on the other hand, poses a real threat to Canadians’ economic well-being. For example, it increases the risk and severity of natural disturbances, such as fires, floods, and severe storms. A conservative estimate is that the impacts of climate change will cost our economy at least $35 billion by 2030, and much more in future decades.

Critics’ Claim #3: It makes little sense to have both a carbon price and rebates.

What the evidence shows: The price-and-rebate approach provides an incentive to reduce carbon emissions (due to the price), while maintaining most households’ overall purchasing power (due to the rebate).

Carbon pricing works by raising the price of carbon-intensive products, so consumers and businesses are incentivized to adopt lower-carbon options, such as smart thermostats, heat pumps, or hybrid/electric vehicles.

Giving back most of the carbon-pricing revenues in rebates doesn’t undermine this goal; consumers still have the incentive to reduce emissions. The rebates just ensure that most households come out ahead, because they receive an amount back that is slightly above what the average household spends on carbon pricing. Those that reduce emissions the most will come out further ahead; they will pay less in carbon fees but still get the full rebate.

Critics’ Claim #4: Carbon pricing harms Canadian business competitiveness.

What the evidence shows: Canada’s carbon-pricing scheme is designed to help businesses reduce emissions at low cost, while competing in the emerging low-carbon global economy.

For large emitting sectors in most provinces—like oil, steel and cement—there is an “output-based” carbon pricing system. In effect, it means most large industries pay the carbon price only on the last 10-20 percent of their emissions. The lower-emitting firms pay less while higher-emitting firms pay more—creating a strong incentive for all firms to reduce emissions.

The output-based system is designed to maintain industries’ competitiveness: ensuring that the carbon price does not hamper their ability to stay profitable and generate jobs in Canada while competing internationally.

In addition, carbon pricing stimulates innovation by encouraging the development and adoption of low-carbon technologies. These incentives help Canadian businesses—in all sectors—stay competitive in the global transition to a low-carbon economy.

Critics’ Claim #5: Carbon pricing isn’t necessary.

What the evidence shows: Here the critics are right. Canada could abandon carbon pricing and still hit our climate targets by using other types of regulations and subsidies—but it would be much more costly to do so.

Unfortunately, the most vocal opponents of carbon pricing are not offering alternative policies to reduce emissions and meet our climate goals. And they certainly aren’t offering any alternatives that would reduce emissions at the same low cost as carbon pricing.

Canada has many economic challenges to address. In a world of scarce resources, it seems imprudent to abandon carbon pricing, only to replace it with more costly methods of reducing emissions—or, worse still, take no measures to reduce emissions.

In short, carbon pricing is the least-cost way to reduce emissions, drive green innovation, and support Canada’s transition to a clean and prosperous economic future.

For more research on carbon pricing in Canada, see https://ecofiscal.ca/reports

Signatories

Richard Lipsey
Emeritus Professor
Simon Fraser University
Christopher Ragan
Director
Max Bell School of Public Policy, McGill University
Elizabeth Beale
Former President and CEO
Atlantic Economic Council
Mel Cappe
Distinguished Fellow
Munk School of Global Affairs and Public Policy, University of Toronto
Bev Dahlby
Professor (retired)
School of Public Policy, University of Calgary
Don Drummond
Stauffer-Dunning Fellow
Queen’s University
Stewart Elgie
Jarislowsky Chair in Clean Economy
University of Ottawa
Glen Hodgson
Chair
VeriStell Institute
Justin Leroux
Professor
Department of Applied Economics, HEC Montreal
Nancy Olewiler
Professor
School of Public Policy, Simon Fraser University
France St-Hilaire
Former Vice-President of Research
Institute for Research on Public Policy
Lindsay Tedds
Professor
Department of Economics, University of Calgary
Kevin Milligan
Professor
UBC
Andrew Leach
Professor of Economics and Law
University of Alberta
Joel Wood
Associate Professor
Thompson Rivers University
Blake Shaffer
Associate Professor
University of Calgary
Jim Stanford
Economist and Director
Centre for Future Work
Stephen Gordon
Professeur titulaire
UNiversité Laval
Christopher Barrington-Leigh
Associate Professor
McGill University
Guy Lacroix
Professeur titulaire
Université Laval
Arthur Silve
professeur agrégé
Université Laval
Nicholas Rivers
Associate Professor
University of Ottawa
Vincent Boucher
Full Professor
Laval University
Sylvain Eloi Dessy
Professor of economics
Laval University
Fabian Lange
Professor
McGill University
Rob Gillezeau
Assistant Professor
Rotman School of Management, University of Toronto
Marcel Boyer
Emeritus Professor of Economics
Université de Montréal
Maya Papineau
Associate Professor
Carleton University
Philippe Barla
Full professor
Université Laval
Catherine  Deri Armstrong
Associate Professor
University of Ottawa
Mikal Skuterud
Professor
University of Waterloo
Justin Beaudoin
Associate Professor
Acadia University
Ross Hickey
Associate Professor
University of British Columbia Okanagan
Sonia Laszlo
Associate professor
McGill University
Kevin Devereux
Assistant Professor
Peking University
Michel Roland
Professeur titulaire
Département d”économique
Frances Woolley
Professor
Carleton University
Kenneth Carlaw
Professor
University of British Columbia Okanagan
Lars OSBERG
McCulloch Professor of Economics
Dalhousie University
Minjoon Lee
Associate Professor
Carleton University
Charles Séguin
Professor
UQAM
Baxter Robinson
Assistant Professor
University of Western Ontario
Stephan Schott
Professor
Carleton University
Yuri Yevdokimov
Professor of Economics
University of New Brunswick
Kevin Moran
Associate Professor
Université Laval
Jennifer Stewart
Director
School of Public Policy and Administration, Carleton University
Nicolas Schmitt
Professor
Simon Fraser University
Lanny Zrill
Adjunct Research Professor
Carleton University
Tom L Green
Senior Climate Policy Adviser
David Suzuki Foundation
Kristian Behrens
Professor
UQAM
Bruno Larue
Professeur titulaire
Université Laval
Patrick Mundler
Professor
Université Laval
Curtis Eaton
Emeritus Professor
University of Calgary
Alain  Paquet
Full professor
Dept of Econ., Univ. of Quebec at Montreal
Stephen Williamson
Professor
University of Western Ontario
David  Gray
Professor of economics
University of Ottawa 
Yazid Dissou
Professor
University of Ottawa
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Full professor
Université du Québec à Montréal 
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Full professor
ESG-UQAM
Hashmat Khan
Professor
Carleton University
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Professor
Wilfrid Laurier University
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Assistant Director
McMaster University 
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Retired professor
Université du Québec à Montréal
David Green
Professor
Vancouver School of Economics, UBC
Leslie Shiell
Assistant Professor
University of Ottawa
David Macdonald
Assistant Professor
University of British Columbia, Okanagan
Andrei Munteanu
Assistant Professor of Economics
UQAM
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Assistant Professor
University of British Columbia
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Professor
Vancouver School of Economics, UBC
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Assistant Professor
University of British Columbia
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Professor
University of Calgary
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Professor
University of British Columbia
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professor
University of Calgary
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Professor
University of British Columbia
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Associate Professor
University of Ottawa
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Laval University (Université Laval)
Ken McKenzie
Professor
University of Calgary
Pierre Fortin
Emeritus Professor of Economics
University of Quebec-Montreal
Katherine Wagner
Assistant Professor
University of British Columbia
Robert Leonard
Professor
UQAM
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Associate Professor
Simon Fraser University
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Associate Professor
Université du Québec à Montréal
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Senior Research Associate
University of Calgary
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Professor
Simon Fraser University
Peter Victor
Professor Emeritus
York University
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Professeure titulaire
Université Laval
Aidan Hollis
Professor of Economics
University of Calgary
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Professor
University of Ottawa
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Associate Professor
Dalhousie University
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Professor
University of Ottawa
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Associate Professor
Simon Fraser University
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Spencer Family Associate Professor
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University of Regina
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Associate Professor
Department of Economics, Carleton University
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Assistant Professor
University of British Columbia
Mike Moffat
Professor
Western University, Ivey Business School
Steeve Mongrain
Professor and Associate Dean
Simon Fraser University
Raul  Razo-Garcia
Associate Professor
Carleton University 
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Full Professor
Université Laval
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Assistant Professor
University of British Columbia
Simon Power
Associate Professor of Economics
Carleton University
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Postdoctoral Researcher
University of Ottawa
Hassan Benchekroun
Professor
McGill University
Michael  Smart
Professor of Economics
University of Toronto 
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Associate Professor
McGill University
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Western University
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McGill University
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Associate Professor
HEC Montréal
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Professeur émérite
Économie, Université de Montréal
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Assistant Professor
Queen’s University
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Adjunct Assistant Professor
Queen’s University
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Emeritus Professor
Queen’s University
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Professor Emeritus
Queen’s University
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University of British Columbia
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University of British Columbia
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UBC
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Professor
McMaster University
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Associate Professor
McMaster University
Michael Veall
Professor
McMaster University
W. Craig Riddell
Emeritus Professor of Economics
Vancouver School of Economics, University of British Columbia
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Associate Professor
Wilfrid Laurier University
Heidi Esau
Assistant Professor
University of Calgary
Gregory Dow
Emeritus Professor
Simon Fraser University
Matthieu Chemin
Professor of Economics
McGill University
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Professor
McGill University
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University of Calgary (School of Public Policy)
Gregor Smith
Professor
Queen’s University
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Professor
HEC Montréal
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Assistant Professor – Centennial Chair in Community Energy Development
University of Saskatchewan
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Associate Professor
University of British Columbia
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Professor
Polytechnique Montréal
Fanny Moffette
Professor
Université du Québec à Montréal
Horatiu Rus
Associate professor
University of Waterloo
Bernard Fortin
Emeritus professor in economics
Université Lavaal
Richard Harris
Emeritus Professor
Simon Fraser University
Leonard Goff
Assistant Professor
University of Calgary
Matthew  Webb
Associate Professor
Carleton University 
Larry Epstein
Professor of Economics
McGill University
John Richards
emeritus professor
Simon Fraser University
James MacKinnon
Sir Edward Peacock Professor of Econometrics
Queen’s University
Rui Castro
Professor
McGill University
Isaac Holloway
Lecturer
UBC Sauder School of Business
Umut Oguzoglu
Professor
University of Manitoba 
Fernando Saltiel
Assistant Professor of Economics
McGill University
Mokhtar Tabari
Assistant Professor
University Canada West
Jean-William Laliberté
Associate Professor
University of Calgary
Huw Lloyd-Ellis
Professor
Queen’s University
Sanghoon  Lee
Associate professor
UBC Sauder school of business 
Pierre-Carl Michaud
Professor of Economics
HEC Montréal
Alain Delacroix
Professor of economics (full)
UQAM – École des sciences de la gestion
John Janmaat
Professor of Economics
The University of British Columbia – Okanagan 
Luc  Godbout
Professeur
Chaire en fiscalité et finances publiques – Université de Sherbrooke
Clyde Reed
Professor Emeritus
Simon Fraser University
Philippe Goulet Coulombe
Professor
Université du Québec à Montréal
Thomas Davidoff
Associate Professor
Sauder School of Business, UBC
Luc Clair
Associate Professor of Economics
University of Winnipeg
Franque Grimard
Associate Professor
McGill University
Christine Neill
Associate Professor and Chair
Department of Economics, Wilfrid Laurier University
Peter Tsigaris
Full Professor
Thompson Rivers University
Juan S. Morales
Assistant Professor
Wilfrid Laurier University
Jim Gaisford
Professor
Thompson Rivers University
Ridwan Karim
Assistant Professor
Wilfrid Laurier University
Meng Sun
Associate Teaching Professor
Thompson Rivers University 
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Professor, Chair of Economics Department
Thompson Rivers University
John Hartwick
Professor Emeritus
Queen’s University
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Adjunct Professor
Queen’s University
Azim Essaji
Associate Professsor
Wilfrid Laurier University
William Sims
Professor Emeritus
Concordia University
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Associate Professor
University of Victoria
William Sims
Professor Emeritus
Concordia University
Allan Gregory
Emeritus Professor
Queen’s University
Catherine Michaud-Leclerc
Assistant Professor
Université Laval
Heather Eckert
Associate Professor
University of Alberta
Mostafa Askari
Chief Economist
Institute of Fiscal Studies and Democracy
Gajendran Raveendranathan
Assistant Professor
McMaster University
Randall Wigle
Professor Emeritus
Wilfrid Laurier University
Aamir Hashmi
Associate Professor (Teaching)
University of Calgary
Chris  Auld
Associate Professor
University of Victoria
Francisco Alvarez-Cuadrao
Associate Proxfessor
McGill University
Ruth Forsdyke
Senior Instructor
Dalhousie University
Michael  Barber
Continuing Adjunct Assistant Professor
Queen’s University
Nicolas-Guillaume  Martineau
Associate Professor
York University, Glendon College
Bill Dorval
Assistant Professor
Royal Military College of Canada
Joseph Steinberg
Associate Professor
University of Toronto
Ardyn Nordstrom
Assistant Professor
Carleton University
Benoit Dostie
Professeur titulaire
HEC Montréal
Anupam Das
Professor
Mount Royal University
Francisco Ruge-Murcia
Professor and Chair
Department of Economics, McGill University
Brett House
Professor of Professional Practice
Columbia Business School
Christian Trudeau
Professor
University of Windsor
Simon Woodcock
Associate Professor
Simon Fraser University
Brian Copeland
Professor of Economics
University of British Columbia
Stefan Staubli
Associate Professor
University of Calgary
Adam Lavecchia
Assistant Professor
McMaster University
Lucija Muehlenbachs
Associate Professor
University of Calgary
Andrea Craig
Assistant Professor
University of British Columbia Okanagan
Simon Woodcock
Associate Professor
Simon Fraser University
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Associate Professor
Thompson Rivers University
Etienne Billette de Villemeur
Adjunct Professor
Université du Québec à Montreal (UQAM)
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Associate Professor
Carleton University 
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Assistant Professor
McMaster University
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Assistant Professor
Saint Mary”s University
Tony Fang
Professor and Jarislowsky Chair
Memorial University of Newfoundland
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Assistant Professor in Economics
HEC Montréal
Rémi Morin Chassé
Professor
Université du Québec à Chicoutimi
Nahid Masoudi
Associate Professor
Memorial University of Newfoundland
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Associate Professor
University of Saskatchewan
Joel  Bruneau
Associate Professor 
University of Saskatchewan
Margaret Insley
Professor Emerita
University of Waterloo
John Livernois
Professor
University of Guelph
Jim Sentance
Professor of Economics
University of PEI
Stephen  Snudden
Assistant Professor
Wilfrid Laurier University
Ian Herzog
Assistant Professor
Huron at Western University
Wing Chan
Professor
Wilfrid Laurier University
Jean Eid
Associate Professor
Wilfrid Laurier University
Elizabeth Dhuey
Professor of Economics
University of Toronto
Yuntong Wang
Professor
University of Windsor
Elizabeth Caucutt
Professor
University of Western Ontario
Madeline Turland
Assistant Professor 
University of Alberta
Brian McCaig
Professor
Wilfrid Laurier University
Roberto  Martinez-Espineira
Professor of Economics
Memorial University
Marcin Pęski
Professor of Economics
University of Toronto
Akio Yamazaki 
Associate Professor 
National graduate institute for policy studies
David Rosé
Assistant Professor
Wilfrid Laurier University
Nikolai Cook
Assistant professor
Wilfrid Laurier University
Peter Morrow
Associate Professor
Department of Economics, University of Toronto
Karen Huff
Contract Teaching Faculty
Wilfrid Laurier University
Janice Compton
Associate Professor
University of Manitoba
Sang-Chul  Suh
Professor
University of Windsor
Ryan Compton
Professor of Economics
University of Manitoba
Bruno Salcedo
Assistant Professor 
UWO
Davide Alonzo
Assistant Professor
University of Montreal
michel poitevin
professeur titulaire
université de montréal
Russell Davidson
Distinguished James McGill Professor
McGill University
Devin Serfas
Assistant Professor (I will receive my PhD from UC Davis in June and start at U of A in July)
University of Alberta
Kathleen Day
Associate Professor
University of Ottawa
Marcelo Arbex
Professor
University of Windsor
Andrew Sharpe
Executive Director 
Centre for the Study of Living Standards
Shahidul Islam
Associate Professor
MacEwan University
Carmen Dybwad
Dr
University of Regina
Mathieu Marcoux
Assistant professor
Université de Montréal
Steffen Ziss
Associate Professor
Wilfrid Laurier University
Cherie Metcalf
Associate Professor
Queen’s University
Marc Lévesque
Former Chief Economist
Public Sector Pension Investment Board
Guillaume Sublet
Assistant Professor
Université de Montréal
Christopher Nicol
Professor of Economics
University of Lethbridge
Patrick Lloyd-Smith
Associate Professor
University of Saskatchewan
Philippe Kabore
Professor
Université du Québec à Rimouski
Benoit Perron
Professeur titulaire
Université de Montréal 
Wayne Simpson
Professor of Economics
University of Manitoba
Carlos Yepez
Associate Professor
University of Manitoba
Laura  Brown
Professor
University of Manitoba
Andrew Dickens
Associate Professor
Brock University
Tracy  Snoddon
Associate Professor, Economics
Wilfrid Laurier University
Elizabeth Troutt
Professor
University of Manitoba
Teddy Y.  Samy
Professor
Carleton University
Sumeet Gulati
Professor
Food and Resource Economics, University of British Columbia
James Davies
Professor Emeritus
University of Western Ontario
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Professor
University of Toronto
Tristan Skolrud
Associate Professor
University of Saskatchewan
Harvey King
Associate Professor Emeritus
University of Regina
Jennifer Murdock
Professor, Teaching Stream
University of Toronto
Martin Osborne
Professor Emeritus
University of Toronto
Harry Kitchen
Professor Emeritus, Economics
Trent University
Ronald Wolthoff
Associate Professor
University of Toronto
Colin Stewart
Professor
University of Toronto
Chad Lawley
Professor
University of Manitoba
Susan Howson
Professor Emeritus
University of Toronto
Gerry Helleiner
Prof. emeritus
University of Toronto
Robert Gazzale
Professor, Teaching Stream; Associate Chair Undergraduate Studies
University of Toronto
Yehuda Kotowitz
Professor Emeritus
University of Toronto
Paul Makdissi
Professor of economics
University of Ottawa
Daniel Rondeau
Professor
Dept of Economics, University of Victoria
Monika Çule
Professor and Head
University of Regina
Rose Anne Devlin
Professor
University of Ottawa
Edda Claus
Associate Professor
Wilfrid Laurier University
Michael Abbott
Associate Professor (retired)
Queen’s University
Dane Rowlands
Professor
Carleton University
Victor Aguirregabiria
Professor
University of Toronto
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Assistant professor 
University of Manitoba 
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Associate Professor
ESG-UQAM
Colette Salemi
Assistant Professor
University of Victoria
Patrick Francois
Professor 
University of British Columbia
Philip Oreopoulos
Professor
University of Toronto
Chris Willmore
Associate Teaching Professor
University of Victoria
Peter Dungan
Associate Professor of Economics Emeritus
Rotman School of Management, University of Toronto
Tsur Somerville
Professor
UBC
Marcel Oestreich
Associate Professor
Brock University
Ken Stewart
Professor
Department of Economics, University of Victoria
Robert Clark
Professor
Queen’s University
Tom McCurdy
Bonham Chair in International Finance
University of Toronto
Gorkem Bostanci
Asst. Prof.
University of British Columbia
Frank Reid
Professor 
University of Toronto 
Jonathan Holmes
Assistant Professor
University of Ottawa
Kelly Foley
Associate Professor
University of Saskatchewan
Eric Howe
Professor of Economics
University of Saskatchewan
Jon Cohen
Professor of Economics Emeritus
University of Toronto
Raji Jayaraman
Associate Professor
University of Toronto
Gérard Gaudet
Professeur émérite
Université de Montréal
Gordon Anderson
Emeritus Professor
University of Toronto
Felix Pretis
Associate Professor
University of Victoria
Nusrate Aziz
Associate Professor
Algoma University
Michael Baker
Professor
University of Toronto
Peter Phillips
Distinguished University Professor Emeritus 
Johnson Shoyama Graduate School of Public Policy, University of Saskatchewan 
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Associate Professor
University of Toronto
Bruce Cater
Professor
Department of Economics, Trent University
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Professor
Brock University
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Assist. Prof.
University of Saskatchewan
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Professor
University of Victoria
Carol McAusland
Professor
University of British Columbia
James  Vercammen
Professor
University of British Columbia
Lilia Karnizova
Associate Professor
University of Ottawa
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Professor Emeritus
University of Toronto
Gordon Lee
Teaching Professor
Department of Economics University of Alberta
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Professor
University of Alberta
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Assistant professor
Université Laval
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Professor
University of British Columbia
Frank Strain
Professor Emeritus Economics
Mount Allison University
Josephine Gantois
Assistant Professor
University of British Columbia
Michael Hoy
Professor
University of Guelph
Gregory Mason
Associate Professor – Economics
University of Manitoba
Diego Restuccia
Professor
University of Toronto
Ingrid Bryan
Professor Emerita (PH.D, economics)
Toronto Metropolitan Universith
Roderick Hill
Professor of Economics (retired)
University of New Brunswick
Margarida  Duarte
Professor
University of Toronto
Pierre Brochu
Associate Professor
University of Ottawa
Luc Savard
Full Professor
Mohammed VI Polytechnic University-FGSES-AIRESS-PEP Network
Paul Grootendorst
Associate Professor
University of Toronto
Youngki Shin
Professor
McMaster University
Pierre-Edouard Collignon
Professeur Adjoint
Université Laval
Carlos Ordás Criado
Associate professor
Laval University
Alex Maynard
Professor
University of Guelph
Walid Marrouch
Professor
Lebanese American University
Michael Maschek
Associate Professor
University of the Fraser Valley
Don Dewees
Professor Emeritus of Economics
University of Toronto

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