Federal Government Releases Information on the New National Carbon Pricing Program

The Government of Canada has issued several press releases, as well as explanatory notes and proposed legislation, concerning the new national carbon pricing program, including:

• Next steps in pricing carbon pollution;
• Ministers’ letter to provinces and territories on next steps in pricing carbon pollution;
• Ministers McKenna and Morneau outline next steps in pricing carbon pollution;
• Draft Fuel Charge Regulations;
• Explanatory Notes Relating to the Greenhouse Gas Pollution Pricing Act and Related Regulations; and
• Legislative Proposals Relating to the Greenhouse Gas Pollution Pricing Act.

Within these documents, the federal government has reaffirmed its commitment to pricing carbon nation-wide, including the introduction of a new tax on carbon, which it intends to implement sometime this year at a standard rate of $10 per tonne of carbon dioxide-equivalent emissions.  This rate is expected to rise to $20 per tonne on January 1, 2019, with further annual increases until it reaches $50 per tonne on January 1, 2022.

The proposals also outline an output-based carbon pricing system for industries which are considered large emitters of greenhouse gases (i.e., facilities that emit a minimum of 50 kilotonnes of carbon dioxide-equivalent emissions per year), similar to the cap-and-trade systems in place in Ontario and Quebec.

The federal carbon pricing program is essentially a backstop for provinces and territories that haven’t implemented their own programs.  However, it also establishes a benchmark that must be met by each jurisdiction, and it may be used, in whole or in part, to augment any shortfall in a particular jurisdiction’s carbon pricing system.

Provinces and territories choosing to adopt the federal framework are expected to confirm this decision with the Government of Canada by March 30, 2018.  Alternatively, jurisdictions have the option of implementing their own carbon pricing systems, which can include a direct carbon tax or levy, such as in British Columbia or Alberta, or a cap-and-trade system.  Jurisdictions are expected to confirm their plans for a system that meets the federal benchmark by September 1, 2018.  For example, the expectation is that any direct pricing system would introduce a carbon tax or levy that is in line with the proposed federal rates. 

Currently, Quebec, Ontario, British Columbia and Alberta all have carbon pricing systems in place, while Manitoba has proposed its own carbon tax plan, and Nova Scotia has committed to a cap-and-trade system.  The remaining provinces, with the exception of Saskatchewan, have suggested joining the federal pricing program.