On Monday, October 3, Prime Minister Trudeau provided details of
the previously-announced federal plan to price carbon across
Canada. The federal plan, which is based on the principles accepted
by the First Ministers in the March 2016 Vancouver Declaration,
provides all Canadian provinces and territories with over a year to
introduce their own carbon pricing models (either an explicit price
or cap and trade) meeting the prescribed standards, failing which
the federal government will begin to levy an explicit carbon price
of its own on a broad set of emission sources at the specified
floor price in 2018. Putting a steadily increasing price on
greenhouse gas (GHG) emissions is widely viewed as an essential
part of a cost-effective plan to address climate change, and is
expected to help stimulate innovation, clean growth and
Canada's transition to a low-carbon economy.
Notwithstanding the March 2016 Vancouver Declaration, reports in
the media indicate that not all of the provinces and territories
currently agree with the imposition by the federal government of a
price on carbon. Complaints about the limited extent of the federal
government's consultation are being voiced, and concessions are
reportedly being sought as a condition for the support of some
provinces and/or territories.
In the absence of unanimous support, the unilaterally announced
federal plan is clearly designed to minimize potential objections
revenue neutrality (to the federal
government) - all of the revenues will be returned to the
jurisdiction in which they were collected;
a low initial floor price of $10 per
Tonne (approximately 2 cents per litre of gasoline) in 2018,
increasing by $10 per Tonne each year to 2022;
flexibly accommodating existing
provincial carbon pricing models (namely the explicit price models
adopted by British Columbia and Alberta, and the cap and trade
model adopted by Ontario and Quebec, provided that the provincial
models continue to align with Canada's national target for the
reduction of its GHG emissions); and
providing the remaining provinces and
territories with more than a year to adopt a carbon pricing model
of their own.
The imposition of the proposed pan-Canadian minimum price on
carbon is an important step by the federal government toward the
achievement of Canada's international climate change
commitments, but leaves much to be done. The pre-existing
provincial carbon pricing models, together with the dim prospects
for federal/provincial unanimity on carbon pricing, seems to have
tied the federal government's hands and to have made both the
unilateral federal announcement and the return of all carbon
revenues to the provinces and territories, necessary elements of
the federal model. As a result, further federal action on climate
change will have to be regulatory in nature and/or be funded from
revenues other than the price on carbon. As the recipients of the
carbon revenues, the provinces and territories will have the
financial resources, and responsibility, to continue to take on a
central role in achieving Canada's climate change commitments.
Under this decentralized model, it may also be more difficult for
the federal government to implement carbon border adjustments (for
example, as were contemplated by the ill-fated U.S. national
(Waxman- Markey) cap and trade bill) which could become a more
significant concern as the price on carbon continues to rise.
In any event, there is reason to hope that the price on carbon
announced by the federal government will help to efficiently
stimulate innovation, clean growth and the transition to a
low-carbon economy by partially internalizing the environmental
costs of polluting activities. A steadily increasing price on GHG
emissions should assist businesses to plan more effectively and
enable the business and individual investments in clean
technologies required for Canada to meet its international
obligations and to compete in the rapidly growing global cleantech
markets. The announced price on carbon will, however, need to be
effectively supported by the complementary educational, regulatory,
infrastructure and other economic actions, currently being
developed by the federal / provincial working groups under the
Vancouver Declaration, for Canada to meet its international
obligations and successfully transition to a low-carbon
The content of this article does not constitute legal advice
and should not be relied on in that way. Specific advice should be
sought about your specific circumstances.
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In 2017, Canada's energy sector faces continued uncertainty and inertia. From taxes to transportation, Canada's natural resource industries – and their benefits to the national economy – are under threat...
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