Canada Announces First National Carbon Price
Author: Marty Middlebrook
Canada's federal government is set to reach an agreement with their ten provincial counterparts on the implementation of a national carbon price.
The Prime Minister, Justin Trudeau, says the carbon price will help the country meet its 2015 Paris agreement targets. He also says it will help the local green technology sector.
The deal further aligns Canada's climate policy with that set by President Obama, which in part aims to cut carbon emissions from coal-fired power stations.
The agreement sets a price on carbon pollution of $C10 a tonne in 2018. This price increases by $C10 a year until it reaches $C50 in 2022. The individual provinces have a level of inpendence and can choose to implement a carbon tax or a cap-and-trade scheme. Those that don’t implement a market scheme will be subjected to a price set by the national government.
Canada has set a target to reduce emissions by 30 per cent by 2030, compared with 2005 levels. The new agreement combined with a plan to reduce methane emissions and a clean fuel standard has environment groups hopeful that the country will achieve its goals.
Snapshot of Canada’s Carbon Price
- The floor (or minimum) price set by this agreement is designed to help individuals and companies seek out lower emission options. The price can come in the form of a specific tax or levy, like the minimum $C10 per tonne the federal government has set for 2018, or a more indirect cap-and-trade system.
- It allows for local flexibility. British Columbia, for example, has had a carbon price since 2008, which now sits at $C30 a tonne. It has decided to maintain that price until the other provinces catch up. The government of Alberta is introducing a $20 per tonne in 2017. For both provinces the tax applies to petrol, natural gas and propane.
- The agreement allows for provinces to participate in existing markets. In 2014 Quebec joined California’s cap-and-trade scheme. Ontario is set to join the same program, which sets economy-wide emission limitations with industries buying and selling permits.
- Money raised through the various schemes will be used differently. Those provinces that have implemented a carbon tax will retain the income.
- British Columbia’s system is designed to be revenue neutral, meaning the government will take in no extra money from the tax and instead return it through tax cuts and credits.
- Alberta’s system returns some of the costs to lower-income consumers in the form of a rebate, and small business taxes have been reduced from three per cent to two per cent to help offset costs. About two-thirds will go towards spending more generally on diversifying the economy, including on renewable energy, transit infrastructure and energy efficiency measures. Any federally imposed funds will be returned to the province of origin.
- The scheme includes a number of exemptions. In Alberta and B.C. the agricultural sector and some air travel are exempt, while significant emitters in Alberta, such as the oil sand operations, sit under a different system. Additionally, the government aims to limit the impacts of the price to trade exposed businesses.
- Keep an eye out for the launch of Planet Ark Power, a new program designed to bring solar power to workplaces around the country.
You can see how the rest of the world is tracking on their climate commitments with the Global Climate Action Map.