As of January 2018, all Canadians will be paying a price for
After much anticipation, Justin Trudeau recently announced that
Canada would implement a national price on carbon by 2018. The
announcement was met with significant media fanfare and a touch of
provincial dramatics, but a closer look reveals that Trudeau's
carbon plan may uncover more questions than answers.
The following will highlight what we know and, almost as
importantly, what we don't know about Trudeau's
Pan-Canadian Approach to Pricing Carbon Pollution (the Plan).
Canadian Carbon Pricing: The Basics
The federal government will set a
floor on carbon pricing beginning on January 2018 for those
provinces that do not implement their own regime
The Plan allows provinces to
implement either a carbon tax or use a broad market based
mechanism, such as a cap-and-trade scheme
Provinces which choose to implement a
carbon tax: A national carbon floor price will be set at $10/tonne
in 2018 and rise to $50/tonne in 2022
Provinces which choose to implement a
cap-and-trade scheme: Emissions reduction must remain in line with
Canada's 2030 commitment target of 30% below 2005 emission
Revenues generated from pricing
carbon will remain in the province of origin
Canadian Carbon Pricing in Context
We must concede that, even as more of a proposal than an actual
defined policy, Trudeau's Plan is significant when compared
with other carbon pricing initiatives globally. Pro forma, the Plan
would be among a handful of leading global initiatives in setting
carbon prices – and certainly Canada is the only major
hydrocarbon producer to have yet advanced a carbon pricing plan
which is this ambitious. Based on the World Bank's 2016 Carbon Pricing Watch1, the
Plan compares to other carbon pricing regimes as follows, all
determined on a pro forma basis on the assumption the federal
proposal is implemented as proposed.
Top Carbon Price (USD / t
Canada (pro forma, 2022)
California / Quebec ETS
EU ETS 2
On a comparative basis, Canada's carbon pricing appears to
present a sensible balance between the environment and the economy,
but under the surface, the proposed Plan is far from complete.
The tools that the government will
use to actually introduce and enforce a floor price on carbon
How the federal government intends to
properly measure and consolidate the two different pricing methods
(carbon tax vs. cap-and-trade)
How the proposed pricing lines up
with Canada's commitment under the Paris Agreement
While Trudeau's Plan emphasized consistency between the
provinces and suggested using existing regimes, such as British
Columbia's carbon tax or Ontario's cap-and-trade, as policy
anchors, the Plan doesn't yet adequately account for the
fundamental differences between the two methods. The Plan also
doesn't yet connect the proposed pricing floor with
Canada's commitments under the Paris Agreement at least not in
any tangible way. For example, Alberta's carbon pricing
proposal, embraced by Trudeau's Plan, aims to keep emissions
flat until 2030, a far cry from the required 30% reduction under
the Paris Agreement. So is Alberta's Plan in compliance or not?
Will Saskatchewan receive similar treatment and if so, will the
remaining provinces be left to pick up the slack? These questions
echo some of the issues we identified prior to the federal election and
which still remain unresolved.
Following the announcement, Trudeau issued a dire warning to the
provinces. "There is no hiding from climate change. It is real
and it is everywhere." But hiding or not, the provinces will
need real answers to some tough questions before they can take, and
the nation as a whole can take, a coordinated stance on climate
Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market, composed of its generators, transmitters, distributors, retailers, electricity consumers and wholesale electricity market.
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