The Paper.js code explicitly uses the HTMLCanvasElement (line 7137 in dist from 8/11/12 ), which is not in IE8, so the code does not work out of the box.
The page document says:
Paper.js is aimed at modern browsers with support for the Canvas object and EcmaScript 5. Although it is theoretically possible to write code that works in older browsers (yes Explorer 8 and below, we are looking at you!), We currently do not support them out of the box. Let's continue!
Perhaps you can change the paperjs code to make it work, but I did not (testing in IETester ... with the error that the canvas did not have the getContext property, although excanvas should have provided one).