The Government of Canada releases technical paper on pricing carbon pollution

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May 18, 2017

On May 18, 2017, the Government of Canada released a technical discussion paper that outlines a proposed federal carbon pricing option for provinces that choose not to have their own system in place in 2018.

On October 3, 2016, the Government of Canada released “The pan-Canadian approach to pricing carbon pollution” – the benchmark  – outlining the criteria that carbon pricing systems implemented by provinces and territories need to meet. The goal of the benchmark is to ensure that carbon pollution pricing applies to a broad set of emission sources with increasing stringency over time in order to reduce GHG emissions at lowest cost to business and consumers and support innovation and clean growth.

The pan-Canadian approach to pricing carbon pollution provides jurisdictions the flexibility to implement either an explicit price-based system (a carbon tax such as the one in British Columbia, or a hybrid approach composed of a carbon levy and an output-based pricing system, such as in Alberta) or a cap-and-trade system (such as those in Quebec and Ontario).

The Pan-Canadian Framework includes a commitment for a review of the overall approach to pricing carbon by early 2022 to confirm the path forward. An interim report will also be completed in 2020, which will be reviewed and assessed by First Ministers. As an early deliverable, the review will assess approaches and best practices to address the competitiveness of emissions-intensive, trade-exposed sectors.

The federal government plans to introduce new legislation and regulations to implement a carbon pollution pricing system – the backstop – to be applied in jurisdictions that do not have carbon pricing systems that align with the benchmark.

All elements of the backstop will apply in a jurisdiction that does not have a carbon pricing system in place. The backstop will also supplement (or “top-up”) systems that do not fully meet the benchmark. For example, the backstop could expand the sources covered by provincial carbon pollution pricing or it could increase the stringency of the provincial carbon price.

As committed in the October 3, 2016 document Pan-Canadian Approach to Pricing Carbon Pollution, the federal system will return direct revenues from the carbon price to the jurisdiction of origin. The federal government is open to feedback on the best mechanism to achieve this.

Comments on the proposed federal option are welcome until June 30, 2017.

Review the press release and Discussion Paper on the Government of Canada's website and highlights of the discussion paper on Tory's website.

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