Study: Environmentally Adjusted Productivity Growth and the Price of Greenhouse Gas Emissions for the Canadian Manufacturing Sector

Released: 2019-05-08

Multifactor productivity measures how efficiently inputs are used to produce goods and services. It does not capture the environmental consequences of that production. When the output of greenhouse gas (GHG) emissions as the result of manufacturing activity is taken into account, it was found that environmentally adjusted multifactor productivity (EAMFP) in the manufacturing sector grew about 70% faster than the standard measure of multifactor productivity from 2004 to 2015. This is largely attributable to the industry's ability to reduce GHG emissions per dollar of output over time.

Two new Statistics Canada studies, "Environmentally Adjusted Productivity Growth and the Market Price of Greenhouse Gas Emissions for the Canadian Manufacturing Sector" and "Environmentally Adjusted Multifactor Productivity Growth for the Canadian Manufacturing Sector," present, for the first time, productivity statistics for Canada that take into account environmental outputs (emissions of GHGs and criteria air contaminants). They use a new dataset that combines production data from the Annual Survey of Manufactures and Logging with administrative data on criteria air contaminants and GHG emissions from the National Pollutant Release Inventory and Greenhouse Gas Reporting Program collected by Environment and Climate Change Canada. Criteria air contaminants—sometimes called air pollutants—are associated with respiratory illness and are commonly observed as smog, while GHG emissions are associated with climate change.

Multifactor productivity is often associated with technological change, organizational change and economies of scale. EAMFP is a more inclusive measure of productivity that compares the amount of economic output (goods and services) and environmental output (pollution) with the amount of inputs used in production. EAMFP can grow faster than multifactor productivity if, for example, the use of clean technologies allows the same amount of economic output with less pollution.

Key to the derivation of EAMFP is the estimation of the market price of pollution. The market price of GHGs reached $422 per tonne in 2015, a 40% increase from $298 per tonne in 2004. This increase in price is associated with a decline in GHG emissions intensity for large emitters in the Canadian manufacturing sector.

The study also includes additional analysis showing how productivity was affected by three specific types of GHGs, as well as total GHGs, and by eight criteria air contaminants. Overall, stronger EAMFP growth compared with multifactor productivity growth was largely attributable to the sharp decline in most air pollutants and GHGs from manufacturers relative to a modest increase in real (inflation adjusted) output. The estimates in this study will be updated once new information becomes available.

Infographic 1 
The market price and emissions intensity of greenhouse gases (GHGs) for large emitters in the Canadian manufacturing sector

Products

The research article, "Environmentally Adjusted Productivity Growth and the Market Price of Greenhouse Gas Emissions for the Canadian Manufacturing Sector," which is part of Economic Insights (Catalogue number11-626-X), is now available.

Also released today is a study titled "Environmentally Adjusted Multifactor Productivity Growth for the Canadian Manufacturing Sector," which is part of the Analytical Studies Branch Research Paper Series (Catalogue number11F0019M).

To enquire about the concepts, methods or data quality of this release, contact Michael Willox (613-864-0098; michael.willox@canada.ca), Economic Analysis Division.

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