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

Along 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.


| INTRODUCTION
Global climate changes have recently appeared as among the highest environmental challenges and issues. They have also attracted a huge deal of attention all over the world. The established climate patterns are destabilized by the greenhouse gases (GHGs) in the atmosphere and the ecosystems are damaged affecting all living beings. Therefore, incredible efforts are required for avoiding the incrementing risks of climate change on the environment, economy, and human health. 1 Among the key factors of the government's sources of revenue is the tax. Hence, it attempts to increment the share of tax revenues in comparison to the former one to prepare the budget bill every year. 2 Elimination of subsidies and imposing a tax on the consumption of energy carriers have been recently considered to decrease GHG emissions and environmental pollution, particularly carbon dioxide originating from the combustion of fossil fuel. 3 In this concern, the carbon tax is commonly regarded for energy, particularly in developed countries. The two instances of the most common market-based instruments are carbon tax and energy tax which affect both energy consumption leading to CO 2 emissions reduction as well as other key economic variables. 4 Generally, the carbon tax or similar environmental tax are highly used to eliminate the pollutant emissions' noneconomic externalities, which was first highlighted by Pigou. 5 Similar to the environmental tax rate, Pigou revealed that for pollutant emissions, the optimal taxation is equivalent to the environmental damage's marginal expenses. It means that the ultimate benefit of using the polluting commodity should include both the private marginal and the external cost of pollution. 6 There are two direct and indirect classes of environmental taxes. The direct tax is similar to the Pigouvian tax with a definite rate. It is taken per unit of environmental degradation or pollutant emissions. 5 Indeed, the tax rate equals the pollution marginal social cost at the socially effective level. 7 However, the socially efficient level of emissions can be realized by the indirect taxes on the factors of consumption or production of goods that are harmful to the environment. Energy tax and carbon tax are indirect taxes. To investigate the carbon tax effects, the labor tax is assumed to be simultaneously reduced using carbon tax. Moreover, two with/without compensation setups can be used to realize the government tax revenue in this technique. 8 Based on these expectations and within the context of involuntary unemployment, important environmental and economic changes can be affected by environmental taxes. Generally, pollutant emissions, unemployment, the welfare of consumers, conditional demand for factors of production, the general level of prices, the price index of sectors, and gross domestic product (GDP) value are all affected by environmental taxes. Theoretically, the studies have focused on the following triple effects of environmental taxes 3 : 1. The positive effects of the environmental tax on environmental quality: Internalizing the external costs associated with the pollutant emissions.
2. The positive effects of the environmental tax on welfare: Alterations in consumption of services and goods, reducing other taxes like welfare losses and labor tax resultant from the pollutant emissions. 3. The positive effects of the environmental tax on unemployment: Reducing the labor tax causes the decreased labor costs.
Most countries have highlighted the significance of assessing the effects of environmental taxes. For instance, Lu et al. considered the specific circumstances of global warming and GHGs in China. They revealed that the pollutant emissions rate is reduced by 17.45% by the taxation of 300 Yuan/ton of emitted carbon leading to only a reduction of 1% in GDP. 9 Meng et al. in a similar study in Australia observed that the emission index is improved by the taxation of $23/ton of carbon while affecting economic growth. 10 The impacts of imposing the environmental tax were investigated by Alan et al. in three setups. They developed an economicenvironmental model for Scotland and revealed that 37% of the environmental pollution is reduced by imposing a tax of £50 on each ton of CO 2 emissions. Moreover, some tax-related economic activities are improved. 11 The carbon tax concept was discussed by Mahmoud et al. 12 under huge pressure from climate change issues and energy security. They indicated a significant effect of the carbon tax on the economic and environmental issues of the country. Cabalu et al. presented a general equilibrium model for the Philippines' economy and stated that a reduction of 0.5% and 9.8% in GDP and GHG emissions is obtained by the imposition of a $5 tax/ton of carbon CO 2 , respectively. This indicates the positive impacts of this procedure on the economy of the Philippines. 13 A factorial computable general equilibrium (CGE) model was established by Fu et al. 14 in China to investigate the interactions between stepped environmental tax on various fuel types. They studied the stepped carbon tax on types of fuel with various intensities of carbon emission. They found the environmental taxes of 18.37-38.25 Yuan/ton as a rational policy alternative for China. It was also deduced to strengthen the positive effects of reducing carbon emission intensity with an incrementing step range. A stochastic optimization model was proposed by Ji et al. 15 for investment in reduction of carbon and emission as well as sustainable energy planning under risk and cost control for the Zhejiang Province's electric power system planning. They found that the CCS technology development can be stimulated by the carbon emission reduction policy.
Benavente assessed the carbon tax concept for determining the quantity of carbon tax to reduce the emissions and evaluate the related effects on the economy of Chile. It was found that the CO 2 emissions can be reduced by 20% with a $26 tax/ton. It was also indicated that 2%-3% of GDP could be cut down by the tax. 16 The environmental taxation was discussed by Van Heerden et al. for South Africa. They revealed that CO 2 emissions could be reduced by 1900 tons in 2016 and 2300 tons in 2035 by the 12 Rand (the official currency of South Africa) taxation/ton of CO 2 . 17 Calderon et al. discussed different setups on carbon tax and its related needs in Colombia analytically. They revealed that the GDP and economic growth can be reduced by the imposition of the carbon tax. However, it will significantly affect the environmental pollution reduction that could justify its imposition. 18 Zhang et al. assessed three provinces of Hainan, Chongqing, and Fujian in China. They considered the scope of the coal application to produce energy in these provinces. They found that the taxation of 60 Yuan/ton of emissions significantly reduces the quantity of the released CO 2 . It was indicated that other indirect taxes are also reduced by the imposition of carbon tax while improving the households' welfare through subsidization. 19 The carbon tax imposition was studied by Newbery et al. in Canada. They indicated that the emissions could be reduced by carbon tax practices by about 75% by 2050 with less impact on the GDP value and economic growth. It was also necessitated that this tax would enhance the household's welfare by altering other tax sectors. 20 The carbon tax effects were investigated by Perry and Mailonaz on the economy and pollutant emissions in Canada. They used a CGE model and revealed a cut down of 30% of the emissions in 2022 relative to 2005 by a 50 Canadian dollar tax. 21 According to previous studies, a considerable deal of interest has been attracted toward studying the energy tax and carbon tax effects, mainly via the calculable general equilibrium models, worldwide. More attention has been fascinated to the effects of the carbon tax on environmental quality, unemployment, and welfare.
Several studies have been performed on energy and carbon taxes in different countries to improve economic, welfare, and environmental indices. However, no case study has been conducted on the environmental and economic impacts of environmental taxes within the interrelations based on the economy, energy, and environment. Thus, it is essential to assess the environmental taxation policy in Canada considering the distinct conditions of the prime minister's policies at COP26. Indeed, some part of the budget deficit can be compensated by imposing the five environmental solutions. Moreover, climate changes and environmental degradation factors are prevented from originating from GHGs, particularly carbon dioxide. A general equilibrium model is provided in the present study to assess the effects of price on pollution, clean electricity, the cap on emissions, methane emissions reduction, nature-based solutions on environmental issues, employment, and household welfare taking into account the regulations and conditions of Canada. Five different policies indicating the optimal policy in terms of the environmental, economic, and welfare aspects are evaluated. Using GAMS software, this model is implemented. Ultimately, some solutions for modifying the use of fossil fuel resources in terms of the optimum policy attained from the modeling stage are proposed. Thus, the economic and environmental issues can be improved while preserving nonrenewable energy sources.

| METHODOLOGY AND MATHEMATICAL MODELING
A simplified picture of the economy is provided by the general equilibrium model, which well represents the economic factor's reactions and actions. 22 Although the traditional models are designed at the macro level, in these linear programming and input-output models, the general equilibrium model can simultaneously adjust the values and prices for establishing equilibrium and optimization circumstances (such as market clearing conditions, zero profit conditions, and income equilibrium conditions). Both values and prices are endogenic variables in overall equilibrium models, different from linear programming and input-output models. Solving the general equilibrium model mainly aimed to discover endogenous variables (such as equilibrium prices, incomes, and values).
The econometric models need time series and statistics data or various periodic statistics and data. However, fewer statistics and data are required by the general equilibrium models, which use data and statistics of a reference year. 23 The statistics and data of other econometric studies can be utilized related to elasticity. To obtain the general equilibrium model parameters, the calibration technique can be used in terms of the statistics and data of the reference year.

| CGE model description
The computational general equilibrium standard model was utilized in this research, which is the most general well-known balance model standard. This model includes four parts or blocks of equations including price block, production, and trade block, system constraint block, and institution block. Certainly, the essential adjustments were made in the standard model equations for harmonizing it with the Canadian economy. The design of this model is oriented by the information of the social accounting matrix including economic goods, activities, factors of institutions, and production. Capital, labor, and intermediate inputs are utilized in this model within the production procedure. CES production function is included in the composite input by the presence of capital and labor factors. In other words, the other CES function (function of labor and capital) is included in the production function of CES. Thus, the two-level production function is dealt with. At the lower level, by integrating the labor and capital force, a composite input is created. Then, the conversion function is used to convert the created goods into domestic and export goods with constant traction (CET). Composite goods are bought by consumers that are either produced domestically or imported. Integrating domestic and import production is defined by the function of a production (Armington) with a continuous replacement succession. The considered country is the recipient of the average country's global prices of a constant level of imports and exports. To establish the equilibrium in the whole system, the constraints of the system should be balanced such as the equilibrium in the market of production factors, in the composite goods market, in the public sector, equilibrium in the foreign market, and savings investment. After explaining and specifying, the equations of this model are transformed into a programming language within the GAMZ software package. The model equations are simultaneously solved with this software. Figure 1 shows the CGE model's components such as the factors of production, commodities, and prices, along with their association.

| Model framework
First, the model dimensions should be defined based on the integration between the economy and the level of various economic sectors. In the chosen model, the production factors are restricted to capital, labor, and energy. Thus, intermediary inputs and primary materials are not separate factors of production. Hence, capital cost represents the cost of production factors or inputs rather other than the energy and labor in the present model. Energy is used by commodity production sectors and households in the selected model. Moreover, the energy input is not ignored in other sectors like the public goods production sector and the energy production sector. Moreover, it is regarded as input rather than the labor sector input. It is presumed that consumption goods (X), public goods (G), and leisure (F) are also demanded by the households along with the energy demand (E). For simplicity, the public good (as an exogenous variable) is assumed to be constantly provided. Hence, it can be misplaced from the household utility function causing the utility function of U (X, E, F) in the model. To maximize their utility, the values for consumption goods, leisure, and energy demand are selected by the household. Therefore, the equilibrium will be considered along with the household income equilibrium and government budget equilibrium in the energy market (YE), consumption goods market (YX), labor market (L), public goods market (YE), and capital market (K).
The utility is produced by the household by utilizing consumption goods (X), public goods (G), and energy (E). Hence, the household sector can also be regarded as a production sector. In the model, the production sectors include energy production, utility production by households, consumer goods production, and public goods production.
As seen, our model is somehow similar to the household production function model. The household and market behaviors are similar since the household is a utility producer, which utilizes the available time and markets goods for leisure. Here, the energy price index and consumer price index (CPI) are taken for the energy production sector or consumption goods production sector, respectively. Hence, for the utility production sector, a utility price index is also determined. The utility price index in the model is a function of the consumption and income goods price index. Moreover, similar to the household prediction model, in the present model, the household income is not restricted to monetary income. However, it is considered accompanied by the total quantity of leisure time and the time accessible to the household. total household income. It is worth noting that in the household production function model, the time and market goods are not entered directly into the utility function. Thus, our model and the household production function model are different in this regard.

| Model equations
Generally, the competitive general equilibrium model is the basis for the starting point and theoretical basis of all general equilibrium models. Nevertheless, by these models, some uncompetitive assumptions can be also incorporated including uncompetitive pricing, nonmobility of factors, unemployment, and scale-induced savings. The existence of involuntary unemployment is the uncompetitive assumption taken in the model associated with the present study. The conversion of the general equilibrium structure of Walras from a construct to the applied mode is the main idea behind all studies associated with the general equilibrium models.
As stated, the present general equilibrium model includes three groups of equations. The GAMS software can be used to solve the system of general equilibrium equations including nonlinear equations and solve the system of nonlinear equations. Here, three groups of equilibrium variables can be determined such as equilibrium values, equilibrium prices, and equilibrium revenue.
By selecting any specific kind of behavioral functions for consumers and manufacturers, a definite form of unit cost functions is presented along with the conditional demand functions for production factors and goods. Through the goods prices' equality, the zero-profit condition is stated with the unit cost function. The market-clearing condition is stated over the equality of supply of production factors or goods with the conditional demands for production factors and goods. Then, it is essential to present the chosen functional form for utility and production functions before introducing the market clearing and zeroprofit equations.

| Zero-profit condition or unit cost functions
Considering the production functions of households and firms, unit economics optimization can be used to obtain the unit cost functions and express the zero-profit conditions. The zero-profit conditions are stated as the commodity price index equality in various production sectors with the unit cost. The homogenous unit cost functions are one-order functions of the factors price. Indeed, increasing the certain ratio at the factors price increments the unit cost by the same ratio. The unit cost function is homogeneous of degree zero concerning the production levels, assuming the constant returns-to-scale efficiency in the associated production functions. Thus, the unit cost is not changed by the alterations in the production level. Hence, the unit cost function is also the total cost function at the same time. Then, the unit cost function is introduced as above causing the produced commodity price equality with the unit cost to express zero-profit conditions. By choosing the production and CES utility functions in this model, the composite input price index and the unit cost function in the consumption goods section can be determined as follows 21 : where the distribution parameters are represented by the price variables of θ VAX and θ K . R shows the interest rate and W G represents the gross wage. P Q denotes the cost of inputs other than energy or the composite cost of labor and capital factors in the production of x, P X , P E , and P G are the producer price indices. σ QE denotes the energycapital-labor substitution elasticity. σ KL E is the laborcapital substitution elasticity in the energy sector, and σ KL x shows the labor-capital substitution elasticity in the consumption goods sector. σ KL G represents the laborcapital substitution elasticity in the public goods sector. The composite input price index Q shows a hybrid price index for all inputs rather than energy. Moreover, a composite price index is expressed for primary inputs of capital and labor with the value as a function of interest rate and labor wage. 24 Moreover, the utility function as a two-level hybrid function (CES) integrates the composite consumption of goods and leisure. By combining the household's energy consumption (E) and consumption goods (X) at the lower level, the composite consumption goods (AC) are determined. At the higher level, the composite consumption good (AC) is integrated with the leisure (F), thus producing the utility as follows 25 : where C TOTSHR and F SHR are the distribution (share) parameters, T W represents the endogenous variable of the fixed tax revenue, F shows the leisure time, τ TW represents the wage tax rate's endogenous variable, and P U denotes the utility price index. It is worth noting that the utility (U) is a production sector. Since the above-introduced utility function, utility or u is extracted from the consumption of goods, energy, and leisure in the production sector. Indeed, the utility function's general form is U (X, E, F). Hence, P U represents the production sector U's commodity price index. Indeed, by introducing the energy price index and CPI in the energy production and consumer goods sectors, the utility price index is presented within the utility production sector. The utility price index is a function of the consumer price and wage index. 26 The CPI as the same composite price index of commodities is determined as 27 where PC shows the composite CPI and σ XE represents the elasticity of substitution between consumer energy and goods. Public good (G) is not imported into the utility function assuming the stability of public goods supply. Thus, consumer goods and leisure time are directly entered into the utility function against the household production function technique.

| Market clearing
The market's clearing condition is stated through the commodities equality or production supply factors with the conditional demand for production factors and goods. The conditional demand for the production factors and goods is determined by introducing the unit cost function, as 28 where Y X , Y E , and Y G are the activity levels for the sector's production amount and KD is the conditional demand for capital. KD G , KD X , and KD E denote the capital demands, KD0 X , KD0 E , and KD0 G are the capital demands in the reference year, and k X Ө , k E Ө , and k G Ө represent the capital share parameters in the composite input of capital and labor. Taking the conditional demand for labor (LD) into account, the marketclearing condition is obtained as 26 : The parameters applied in Equation (10) are explained below. At the sector level, the production labor demand in different sectors of production is calculated as 29 where LD X , LD E , and LD G denote the labor demands and L X Ө , L E Ө , and L G Ө represent the labor share parameters in the capital-labor composite. 30 Leisure demand: Because of the same utility and production functions, the demand for leisure (FF) is stated as 31 : Commodities market clearing: The commodities market clearing is obtained as 32 in which, CDX shows the marginal demand for consumer goods, GOVT_I shows the government revenue, CDE represents the marginal demand for energy consumption, and IDE denotes the energy intermediary demand.
Using the conditional demand functions in the selected model, the equations of the market clearing are formulated for production factors and commodities. Such homogeneous functions are the first-order functions of the production amount. Indeed, by increasing the considered ratio in the utility or production amount, the demands for factors of production or commodities are increased with the same ratio.
Total consumer market clearing: The total consumer market clearing is analyzed as 33 : where AC denotes the composite consumer goods (aggregate consumption), INC0 represents the reference year income despite leisure, and HH_I_D shows the household disposable income.
Market clearing for utility: The utility coming from market clearing is computed as 34 : where U shows the welfare or utility and HH _ I _ F represents the household's full income (including leisure). 35 Marginal demands for commodities: The marginal demand is analyzed for consumer energy and goods 36 as: where α denotes the constant substitution elasticity. The input changes ratio is indicated by the substitution elasticity as the percentage of changes to the substitution technical marginal rate. Indeed, substitution elasticity represents the substitution of the factors of goods or production by altering their relative prices. Moreover, CD and C0 E x represent the households' demands for energy and goods, respectively. 37 Ultimately, Equation (22) denotes the market clearing conditions for the capital and labor composite input to produce commodity X. 38 where Q shows the inputs other than energy or the total composite input of capital and labor, q VAX denotes the distribution parameter (share) and Y X represents the consumer goods input.
Here, another CES production function is included in the composite input Q by the presence of capital and labor factors. In other words, the other CES function (function of labor and capital) is included in the production function of X (CES). Thus, the two-level production function of X is dealt with. At the lower level, by integrating the labor and capital force, a composite input (Q) is created. while the composite input (Q) and energy (Y E ) are merged at a higher level to create consumer goods (X). Temporarily, to produce the consumer goods (X), the energy input and composite input are used.
The market clearing is obtained for intermediary demand of energy in X production as 39 :

| Income equilibrium
The household's full income (including leisure) is obtained as follows 39 where UR shows the unemployment rate and T W represents the endogenous variable of annual tax revenue. Disposable income or household monetary: The disposable portion or monetary of the household income is also determined in terms of the capital inventory, 40 as follows: Government budget constraint: To obtain the government budget constraint we have 41 :

| Equations governing unemployment circumstances
The wages or labor demand is calculated as 34 in which ρ shows the net wage determined as a function of the endogenous variable of the wage tax rate, thus meeting the constant government tax revenue condition for calculation of this rate. 42 Ultimately, as the last condition, the condition associated with the constant provision of public goods must be satisfied. Thus, the following condition is assumed for the modeling process 43 : in which, Y G represents the public goods production rate and G FIX denotes the government expenditures reliability coefficient.

| Price of pollution
Presently, according to the PMO, over 20% of the GHG emissions in the world are covered by the price of carbon. The COP26 policy of Canada is to tripartite that figure to 60% by 2030. The current price of Canadian carbon is $40/tonne, which is set to increment to $170/tonne by 2030. At the present price, the cost of gasoline is incremented by about 8.8 cents/L. Territories and provinces adopting the federal pricing system possess the proceeds returned to them. In places not meeting the federal requirements such as Alberta, Manitoba, Ontario, and Saskatchewan, rebates are dispensed to citizens to assist offset incremented prices.

| Cap on emissions
The Canadian COP26 policy pledged to decrease the emissions by 40% to 45%, in comparison with 2005 levels, by 2030. An objective of net-zero emissions in the gas and oil sector by 2050 was also stated by Canada.

| Clean electricity
A commitment was stated by Canada to achieve net-zero emissions within the electricity grid of Canada in the COP26 policy by 2030. It also proclaimed up to $1 billion to assist developing countries in the transition from electricity based on coal to clean power.

| Methane emissions
In 2021, Canada joined the Global Methane Pledge officially to decrease methane emissions by at least 30% ZAHEDI and ASLANI | 2697 less than the 2020 levels by 2030. The Canadian COP26 policy is to decrease the methane emissions in the oil and gas sector by 75% less than the 2012 levels by 2040.

| Nature-based solutions
By planting 2 billion trees, Canada committed to protecting 25% of the oceans and land of the country by 2030. It was also announced that in COP26, an extra $9 million in support to the global Ocean Risk and Resilience Alliance to support work in helping the developing coastal countries and island nations encounter climate change challenges. More importantly, by guaranteeing another $6 million for the Global Fund for Coral Reefs, Canada supports coral reef conservation efforts. It permitted the Global Forest Finance Pledge. By announcing its intention at COP26 to present US$12 billion for forest-based climate finance from 2022 to 2030, it assisted forested developing countries to cope with climate change.

| Statistical basis and calculating the features
The main section of applied information and data in the present study is extracted directly from Canada's economy input-output table (OECD Report for Canada, 2018) and Table 1. The total supply equals total demand for all sectors, thus, the values in Table 1 represent the equality of total demand and total supply. According to Table 1, positive values represent the supply of each sector for other counterparts while the demand of each sector from other ones is represented by the negative values. Thus, the summation of the numbers in rows is 0 expressing the equal conditions between the total demand and total supply. The sum of values in each column of Table 1 is 0 considering the equality of revenues and expenditures for each sector in the input-output table. In Table 1, the negative and positive values denote the expenditures and revenues, respectively. Zero-profit and market-clearing condition in general equilibrium models is regarded as the start point and basis of the model. This feature is also recognized in Table 1  A zero-profit condition is represented by the first column values for the consumer services and goods production sector. Based on the first row values in this table, the total supply of services and goods is 346,221,967 Thousand CAD representing the total demands for consumer services and goods (market clearing condition). The factors of production to the labor, energy labor, and capital are restricted by the model selected in this work. Thus, intermediary inputs and primary materials are not considered separate production factors. Indeed, the capital cost represents the cost of inputs and production factors excluding energy and labor.

| Tax impact index
Any policy should be ultimately aimed to enhance the people's welfare. The Hicks equivalent variation is a common index for measuring welfare alterations in the general equilibrium models (EV). It is extracted from the T A B L E 1 Canada's economy input-output markets and desired segments.

Consumer goods and services (X)
Energy (E)

General goods (G) Household (H) Government (GOV)
Consumer goods and services (X) utility function. Indeed, the welfare indicator represents the changes in monetary income. It is measured in the initial time in terms of the earnings and prices before changing the policy to obtain the utility level in the new post-policy equilibrium. Thus, the changes in utility are measured by the welfare indicator (equivalent variation) based on the monetary units. The alterations in the real consumption budget of households are assessed in this study along with the equivalent variation (EV). The CPI denoting the alterations in the general price of services and goods is called the Laspeyres price index.

| Environmental tax module
In the model, it is assumed that CO 2 emissions associated with a specified fossil fuel are proportionate to its amount. The environmental tax imposed on fossil fuels is oriented by the CO 2 content and is modeled as an excise tax. The cost of fuels is increased by the tax, thus inducing the firms to decrease their usage through substitution impacts. Several factors determine the extent of the increment in the production cost including the firm's energy intensity and the ease of substitution among inputs. In this study, the environmental tax is an income stream for the government. The environmental tax imposed on each fossil energy as well as the ad valorem duty rate is determined as 44 : where CTAX f denotes an environmental tax levied on fossil energy f; t c shows the environmental tax's specific duty rate; t cf denotes the environmental tax's ad valorem duty rate on fossil energy f; QQ f is the total domestic consumption of fossil energy f; ε f shows the carbon emission coefficient of fossil energy f; PQ f is the fossil energy f price; and f denotes the fossil energy sets.

| Tax model development
In the present model, the wages are assumed at a fixed level resulting in changes in the energy carrier demands, energy consumption, and CO 2 emissions via the environmental tax policy and altering the price of the energy carriers. Moreover, the quite flexible labor demand and supply are altered with the energy demand variations. The value of the services and goods made by factors of production and their taxation is also included in the real GDP at the basic price, which is flattened by Fisher Price Index.
Generally, the present model includes 60 equations and 60 endogenous or unknown variables that are solved by the associated software. The present paper's methodology comprises four general steps ( Figure 2).

| Tax dynamic CGE model
We developed an integrated sequential dynamic microsimulation CGE model that draws on the contribution of Li et al. 45 and Jia et al. 46 The combination of the growth aspects of a dynamic CGE model with the detailed information provided by microsimulation techniques, allows us to better assess the impact of environmental taxes on labor markets and income distribution. The model is calibrated with Canadian data for 2018. Matching and balancing (data reconciliation) techniques are used to integrate the 29,846 economic families from the Survey of Labour and Income Dynamics into the general equilibrium framework. The integrated framework employed is preferred to other approaches for linking CGE models with survey data since it ensures that feedback effects from the micro level are fully captured at the macro level.
Our CGE model is based on traditional neoclassical economic theory. We developed a multiregional, recursive dynamic CGE model for Canadian Provinces. The model is similar to recent work by Ochuodho et al. 47 but it focuses on the environmental sector instead of the agricultural sector as a primary factor of production. In this model, production was specified in a two-level nest where at the top level, a composite of value-added and a composite of intermediate inputs are substitutable in a CES function. At the bottom level, the primary input factors were assumed to substitute through a CES composite value-added function under a single primary factor nest. Intermediate inputs, on the other hand, were determined by fixed shares through a Leontief function as shown in Figure 3.
F I G U R E 3 Production technology in the multiregional CGE model. Table 1 shows the information and data of 2018, which were initially obtained by solving and calibration of the presented model. The equilibrium values and prices are 1 in the initial solution, while the equilibrium income equals the value presented in Table 1. It is assumed that the reference equilibrium values and prices are always 1. This is because the percent alterations of variables and their deviations from 1 in the model's secondary solution can be determined by the software based on the parameters of policymaking. Figure 4 shows the initial solution and calibration of the model in GAMS software. Figure 3 summarizes the results of the model calibration. The results of the calibrated model revealed that the prices were 1, and the model was correctly calibrated. It is indicated that the CPI, gross wage, production level of each sector, marginal demand, consumer goods, labor and capital demands, and energy were assumed to be 1. However, income variables were considered equivalent to the values in the reference year including household full and disposable incomes. In the reference year, the unemployment rate is 14%, which was made in the calibration and initial equilibrium of the model. Indeed, the reference or initial equilibrium was correctly calibrated. Thus, the model can assess the findings of making policies in the energy sector like carbon taxation, based on the government tax revenues stability and the government expenditures stability.  In this section, the results of solving the presented model are compared with and without running the carbon tax policy. Table 2 shows the results of the initial model solution for the endogenous variables demonstrating the initial solution of the model without using the carbon tax policy. Here, the endogenous variables of the initial solution of the model without applying the carbon tax policy had chosen the number 1were selected as 1.

| Calibration of the model and its initial solution
Regarding carbon taxation and achieving the secondary solution of the model, the deviation of the endogenous variables from 1 and their variations are specified ( Table 2). The uniform tax rate on energy consumption in the secondary solution, for the production and household sectors, is considered as 60%-20%, respectively. The value of 0 denotes the policy without the carbon tax. Considering the lower price of energy in Canada in comparison to the world-level prices, the optimal condition is the greater carbon tax rate (60% tax rate). Table 2 represents the results of running the carbon tax rate equivalent to 60% for Canada via the input-output statistical data of 2018.
The modeling results of carbon tax policy.

Variable
Modeling results Variable Modeling results According to Table 2, taking the value of 1.005 for welfare function, consumer welfare is increased by running the carbon tax policy even without considering the welfare attained from the environmental quality improvement and pollutant emissions reduction. It will be certainly higher, regarding the welfare achieved from the environmental quality improvement and pollutant emissions reduction. Moreover, the composite CPI (inflation) was incremented from 1 to 1.03 after the imposition of the carbon tax, while the production level incremented in the consumer goods sector owing to the increased employment caused by the reduced wage tax.
Furthermore, according to Table 2, by imposing the carbon tax and incrementing the consumer price and energy price index, the production level in the energy sector was reduced. The unemployment rate declined after running the carbon tax policy, taking the unemployment rate index changing from 0.15 in the initial solution to 0.09 in the secondary solution.
By the marginal and intermediary energy demands of 0.68 and 0.873, the intermediary and marginal energy demands were reduced owing to the carbon taxation. Supposing a linear association between pollutant emissions and energy consumption, the pollutant emissions level was reduced. It is indicated the environmental quality is improved after the carbon tax imposition.

| Price of pollution effects on economic indicators
As seen in Figure 5, the price on pollution policy will increase the CPI and decrease the GDP indicator and actual household budget. However, for the employment changes, the range increases from $40 to $120/ton of carbon, then, it is reduced. This is caused by the increased pollution taxes affecting the price of energy supply. The price of pollution effects on these four economic and social criteria is like a quadratic parabolic graph with downward concavity except for the CPI which has an upward concavity.

| Cap on emissions effects on economic indicators
Cap in emissions policy will increment the CPI by 5.7% ( Figure 6). With this policy, the household budget and GDP are decreased by 6% and 1.9%, respectively. It also increments the employment changes by 0.25% while they are reduced by 0.9%. This change was generally owing to the increased electricity prices indirectly affecting the consumer model. This is associated with the role of three main production factors including capital, labor, and energy markets in the supply and production of a commodity. It increments the consumer goods' marginal price by incrementing each factor's price while other factors become constant. 45% Cap on Emissions effect has a peak with -6% on the household budget and after 34% makes the trend of CPI decrease towards the negative side.

| Clean electricity effects on economic indicators
In the proposed model, it was assumed that the wage level and unemployment rate were constant. The energy input price is increased by the clean electricity policy relative to the labor input. It is expected to increment the labor employment by firms by substitution of the inputs. Simultaneously, the employment of production inputs such as labor can be increased or decreased. As seen in Figure 7, by increasing the clean electricity grids of Canada, employment levels will be incremented with a rising then falling trend. By imposing this policy, the household budget and price index are incremented by 1.1% and 7.8%, respectively, while the GDP indicator is reduced by the descending trend. Clean electricity effects on the household budget are almost fixed with little tolerance and for CPI and GDP has linear ratio with positive and negative slope respectively. Its effect on employment is in the form of a parabola of the third degree.

| Methane emissions' effects on economic indicators
According to Figure 8, imposing a methane emission policy reduces the household budget and GDP. Moreover, employment changes are reduced followed by a reduction of 25% in methane emission. However, the CPI is incremented by 4%. GDP is reduced by increasing the price of energy carriers relative to the basic price. Thus, F I G U R E 7 Clean electricity effects on (A) household budget, (B) consumer price index, (C) employment, (D) gross domestic product (GDP). by decreasing household incomes or even increasing lower than the increasing rate in the prices of consumer goods and energy carriers, demand and consumption of public goods are reduced, thus reducing the GDP. The percentage of employment changes is more than 0 within the range of 0%-25% methane emissions reduction. This range is caused by the replacement of other energy systems technology with traditional energy systems making opportunities for new jobs in those novel technologies. However, some energy generation technologies will be shut down for the reduction of more than 25% of the methane emissions, thus making the energy economy less elastic. Methane emissions' effects on the household budget and GDP is a decreasing direct ratio relation and is the opposite of the CPI. For employment, the peak is in 17% methane emission with 0.2% employment change.

| Nature-based solutions' effects on economic indicators
The employment change, household budget, and CPI will be incremented by 2%, 3.8%, and 0.81%, respectively by applying a nature-based solution policy, while the GDP indicator is reduced by 2.62%. This is caused by the increased energy intensity as a result of reducing the resources and land use by constantly earning income on resources for making stuff, thus reducing the GDP. Nature-based solutions' effects on the household budget and CPI is a direct linear ratio and for GDP is thirddegree horizontal parabola and for employment is a third-degree vertical parabola with the concavity in the range of 10%-17.5% of protecting nature ratio. Figure 9 shows the nature-based solutions' effects on the household budget, CPI, employment, and GDP, respectively.

| Carbon tax effects on industries and macroeconomic
The main COP26 policy of Canada is the price on pollution policy, for which the most important setup is the carbon tax. Thus, it is essential to comprehensively and specifically study the effect of the carbon tax on the macroeconomics and industries of Canada. Table 3 represents the results of production changes in various industries by imposing carbon taxes. According to  Table 3, by carbon tax on fossil fuels, production is reduced in food industries, agriculture, textile, chemical industries, wood and paper, steel industries, other industries, natural gas, transport and trade, electricity, and services. Petroleum products and construction are increased over mining production. By increasing the tax rates, the sector's production is less altered except for the gas and oil sectors.   Table 4 displays the total export level inflation rate, the impacts of the carbon tax on the GDP, and imports in presenting 20%, 40%, and 60%. As shown in Table 1, Canada's economy input-output markets and desired segments are changed based on the percentage of the carbon tax input to each macroeconomic variable. It is clear that with the increase in carbon tax percentage, the CPI index, total export level, and total import level also increase. On the other hand, with the increase in carbon tax, GDP decreases. This is because as the tax increases for each industrial sector, private consumption, and gross private investment decreases which leads to the decrease of the total GDP.
According to Table 4, in the studied scenarios, GDP levels at current prices reduced to 0.47%, 1.66%, and 2.82%, respectively. Comparing setups of 20% and 60%, the GDP growth rate will reduce from −0.47% to −2.82% by increasing the carbon tax on households in the setup of 60% and increasing the demand from households for services and goods. In other words, the GDP reduction is incremented by 2.35% owing to the increased general prices level. Undeniably, there are other factors affecting these statistics accompanied by subsidy targeting.
3.2.7 | Carbon tax effects on macroeconomic indicators based on the dynamic CGE model Table 5 displays the carbon tax ratio as projected for the energy economy and social development in Canada for the next five decades. It can be seen that the carbon tax ratio is expected by demography to rise from 18% in 2020 to 40% in 2060, that is, to more than double over the next 40 years. The table also reports the close approximations used for the simulations. It is assumed that the carbon tax is established in 2019 at 20%.

| CONCLUSION
The Canada Government was ambitious with COP26 policies. However, it is doubtful whether it has sufficient policy tools under its direct control for inducing households or firms to behave to ensure meeting these targets. No studies have been performed on the effects of these policies in the triple domain of energy, environmental and economic fields of Canada. Thus, the present study was performed to cover this gap.
Analyzing the price of pollution, clean electricity, the cap on emissions, methane emissions, and nature-based solutions' effects on the economy of Canada indicates that energy consumption and CO 2 emissions are reduced by all of the scenarios in the Canadian economy.
We obtained the following results: 1. The price on pollution policy has the most negative effect on the actual household budget, with a reduction of 8%. Moreover, the nature-based solutions possess the best effect with an increase of 2%. 2. All of the COP26 policies have negative impacts on the CPI thus increasing the index. The least effect is imposed by the methane emissions policy-and naturebased solution at 4% and 3.8%, respectively. 3. Clean electricity and nature-based solutions policies increment employment steadily for employment change. However, the employment changes are positive for other policies in the range of $0-$120/ ton carbon, 0%-33% cap on emissions, and 0%-26% methane emission reduction, while it becomes negative outside of those ranges. 4. All the COP26 policies negatively affect the actual change in GDP. Nature-based solutions and price on pollution policies have the highest negative effects with a reduction of 2.62% and 3% in GDP, respectively. 5. It is indicated that the use of carbon tax will not dependent on other policy considerations in energy pricing for determining the tax based on the carbon content of each energy carrier when the government possesses no budget deficits and it mainly tries to decrease GHG emissions. Thus, better conformance is achieved with the emissions control goal. Hence, carbon taxation will be an effective policy to reduce emissions and increase the welfare of society, even without considering the external effects caused by environmental quality improvement. Based on model simulations, the execution of tax policies causes the maximum reduction of pollutant emissions as is 166% and a 60% carbon tax is required for a reduction of 100% in pollutant emissions.
The positive results of the COP26 policies were considered based on welfare improvement, saving energy, unemployment reduction, and reduced pollutant emissions. Thus, it is proposed to run the price on pollution policy irrespective of any appropriate basis for energy pricing by the reduced labor tax and non-cahnged government total tax revenues. Indeed, it is recommended to implement the carbon tax policy for the reduced taxes and profits like taxes on salaries and wages proceeding from the employer for the unemployment insurance and Social Security Insurance. The labor tax can even be negative for the constant total tax revenues.
The proposed model can be extended in future works for the inclusion of more production inputs (rather than labor, energy, and capital), more markets, and more production sectors. Thus, more flexible production functions should be selected rather than the CES function like the translog production function. In most general equilibrium studies, the initial point to select the equations is oriented by the competitive conditions within the framework of competitive constraints, and uncompetitive conditions. Similarly, in the present study, only the involuntary unemployment confirmed with Canada's economy was considered in the model based on the uncompetitive condition. Other circumstances of uncompetitive economics can be introduced into the general equilibrium model in future studies.