The Government of Canada has proposed a pan-Canadian approach to pricing carbon emissions; under the new plan, all Canadian jurisdictions will have carbon pricing in place by 2018.
To accomplish this, Canada will set a benchmark for pricing carbon emissions—set at a level that will help Canada meet its greenhouse gas emission targets. Provinces and territories will have flexibility in deciding how they implement carbon pricing. Jurisdictions can implement: (i) an explicit price-based system (a carbon tax such as British Columbia’s or a carbon levy and performance-based emissions system like in Alberta); or (ii) a cap-and-trade system (e.g. Ontario and Quebec).
Pricing pollution is one of the most efficient ways to reduce greenhouse gas emissions and to stimulate innovation. Already 80 percent of Canadians live in a province where there is pollution pricing. We want to continue this trend and cover the final 20 percent.—Catherine McKenna, Minister of Environment and Climate Change
Pricing will be based on greenhouse gas emissions and applied to a common and broad set of sources to ensure effectiveness.
For jurisdictions with an explicit price-based system, the carbon price should start at a minimum of $10 per tonne in 2018, and rise by $10 per year to $50 per tonne in 2022.
Provinces with cap-and-trade need: (i) a 2030 emissions reduction target equal to or greater than Canada’s 30 percent reduction target; (ii) declining (more stringent) annual caps to at least 2022 that correspond, at a minimum, to the projected emissions reductions resulting from the carbon price that year in price-based systems.
Provinces and territories choosing a cap-and-trade system will need to reduce the number of greenhouse gas emission permits they make available to businesses. The number of available permits will decrease every year, based on both emission cuts through to 2022 (equal or greater to what would be achieved by a direct price) and a 2030 target equal or greater to Canada’s.
The Government of Canada will provide a pricing system for provinces and territories that do not adopt one of the two systems by 2018.
Revenues from carbon pricing will remain with provinces and territories of origin. Provinces and territories will use the revenues from this system as they see fit, whether it is to give it back to consumers, to support their workers and their families, to help vulnerable groups and communities in the North, or to support businesses that innovate and create good jobs for the future.
The overall approach will be reviewed in 2022 to ensure that it is effective and to confirm future price increases. The review will account for actions by other countries.