On 20 December 2017, the Canadian Environment and Climate Change Minister Catherine McKenna and Finance Minister Bill Morneau announced in a letter to the 13 provincial governments that provinces and territories will have until 1 September 2018 to outline their carbon pricing plan in line with the Pan-Canadian Framework on Clean Growth and Climate Change that was announced in December 2016.
This new deadline gives the provinces nearly one more year to work out and implement their plans. The federal government will assess each jurisdiction’s carbon pricing approach to determine whether it meets the federal standard. If they fail to meet the standards set by the federal government, the federal approach will go into effect as of 1 January 2019 with a starting price of CAD 20 per ton. This would either completely replace the proposed approach in that jurisdiction or be partly implemented to ‘top up’ or strengthen the approach. From 2019 onwards, the national government will also annually verify all pricing systems to ensure they meet the national benchmark.
Jurisdictions may also adopt the federal approach from the beginning, which would then be implemented from fall 2018 in these jurisdictions starting at a price of CAD 10 per ton. Those wishing to do so must make their request to the national government by 30 March 2018.
Four Canadian provinces have already established a carbon pricing system. Québec and Ontario both have an emissions trading system (ETS), while British Columbia has a carbon tax and Alberta has a combination of a carbon levy and performance-based emissions system. In 2017, four more provinces unveiled their proposals for a carbon pricing system, including New Brunswick, Manitoba, Saskatchewan and Nova Scotia; the latter of which plans to implement a cap and trade system. However, there are concerns from the national government that Saskatchewan and New Brunswick plans do not meet the federal threshold. Neither is it clear whether Nova Scotia’s plans meet the federal requirements.
These plans are part of the Pan-Canadian Framework on Clean Growth and Climate Change that requires all Canadian provinces and territories to introduce carbon pricing by 2018. Jurisdictions can either implement a price-based system (e. g. a carbon tax) or an ETS, provided the ETS cap is in line with: (a) Canada’s national emissions reduction target of 30% below 2005 levels by 2030 and (b) the reductions expected from provinces with a direct price on carbon. In jurisdictions that opt for a carbon tax, the carbon price should start with a minimum of CAD 10 per ton (EUR 6.80) in 2018, rising by CAD 10 annually to reach CAD 50 (EUR 34) per ton by 2022. If neither a price-based system nor an ETS is in place by 2018, the national government will impose a carbon price in that jurisdiction. Pricing is to be applied to a common and broad set of sources to ensure effectiveness, and the policy will be revenue neutral for the national government. All revenues generated will remain in that province or territory.
