Carbon Pricing Developments Across Canada

Carbon pricing was a major topic of discussion in the recent Pan-Canadian Framework on Clean Growth and Climate Change, with the federal government requiring provinces and territories to adopt a carbon price by 2018. The Framework gives provinces the choice of carbon tax, cap and trade, or a combination with common scope of emissions coverage. Carbon tax systems should start at $10/T CO2e in 2018 and rise by $10/year to $50/T CO2e in 2022. Meanwhile, cap and trade systems need a 2030 emissions reduction target greater than Canada’s, as well as emission caps that decline each year until 2022 and correspond to (at least) the projected emissions reductions resulting from carbon tax systems in that year. The federal government will introduce an explicit price-based system in jurisdictions where the Framework benchmarks are not met, with all revenues being returned to the province or territory of origin.

The Government of Canada indicated its intention to compare the stringency and effectiveness of carbon pricing systems across Canada by early 2022. An interim report to be completed in 2020 will allow First Ministers to assess and address competitiveness issues. Here is a brief rundown of the current state of carbon pricing in Canadian provinces and territories to date.

  • British Columbia – Carbon tax frozen at $30/T since 2012 that covers all fossil fuel combustion
  • Alberta – Carbon levy of $20/T in 2017 and $30/T in 2018 that covers all fossil fuel combustion
  • Saskatchewan – Opposes carbon pricing and maintains that its investment in carbon capture and storage technology is equivalent
  • Manitoba – Carbon pricing in development
  • Ontario – Cap and trade with a 2017 cap of 142,332,000 T CO2e, and a 2020 target of 15% reduction below 1990 levels. Mandatory participants include facilities that emit >25,000 T CO2e/year excluding the forestry, agriculture, and waste sectors. System to link with Quebec and California in 2018.
  • Quebec – Cap and trade system linked with California, with allowances sold at CA$17.29/T CO2e at the latest auction. Quebec’s emissions target is 20% below 1990 levels by 2020. The system covers entities that emit >25,000 T CO2e/year excluding the agriculture and waste sectors.
  • New Brunswick – Carbon pricing mechanism in development
  • Nova Scotia – Cap and trade system in development
  • Prince Edward Island – Carbon tax in development that is likely to start at $10/T CO2e
  • Newfoundland & Labrador – Carbon pricing mechanism in development
  • Yukon – Will follow federally imposed carbon tax in 2018

Leading organizations will get out ahead of these policies and work to understand the risks and opportunities emerging from each carbon pricing regime. Please contact Zizzo Strategy at info@zizzostrategy.com for further information or to discuss how these regulatory developments and market trends could impact your organization.

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