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Federal government announces next steps for establishing carbon pricing across Canada: Reaction

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By Jane McDonald, December 21, 2017

Jane McDonald, Managing Director at the International Institute for Sustainable Development, made the following statement in response to the federal government announcing its next steps for establishing carbon pricing across Canada:

Today, the federal government sent letters to all provinces and territories outlining the timeline for when it will implement common minimum requirements for a price on carbon across the country. This is a key step forward in enacting the Pan-Canadian Framework on Clean Growth and Climate Change in order to meet Canada’s commitment under the Paris Agreement.

Pricing carbon emissions is a well-established approach to climate change in Canada and around the world. Even before the Pan-Canadian Framework was announced in 2016, 85 per cent of Canadians already lived in a province with carbon pricing. And this year, 67 different jurisdictions around the world are pricing carbon, including the European Union, China, Mexico and major U.S. states.

There are no real surprises in these letters; the minimum common requirements announced in 2016 have not changed. The price has to apply to a broad set of emission sources—not just one sector—and rise over time according to a national floor. Provinces and territories have the flexibility to choose between three different carbon pricing approaches, recognizing the efforts of provinces that have already implemented this policy. If a province or territory does not implement a carbon pricing system according to these guidelines, the federal government’s system is applied and all revenues are returned to that jurisdiction.

What we have not known until now is how this process would roll out. The letters outline three steps:

  1. Any province and territory that chooses to have the federal government apply a carbon price will have to confirm this with the federal government by March 30, 2018.
  2. By September 1, 2018, every province and territory will have to submit details of how their own plans meet the common minimum standards laid out in 2016 in the Pan-Canadian Framework.
  3. If a province’s or territory’s plan does not meet those minimum standards, the federal approach will apply (in whole or in part) so that by January 1, 2019 every Canadian jurisdiction has a CAD 20 per tonne levy or equivalent emissions target.

That means the federal government's carbon price will start at CAD 20 per tonne in 2019, rather than the originally planned CAD 10 per tonne in 2018.

Impacts on provinces and territories will vary. Provinces who already have carbon prices—British Columbia, Alberta, Ontario and Quebec—will not be affected in the next few years. In provinces like Saskatchewan, where the government has so far refused to move ahead with any price on carbon, the federal government will apply the full minimum price of CAD 20 per tonne on January 1, 2019. Some provinces will be subject to the federal price, but only in part and at a later date. Manitoba’s flat CAD 25 per tonne means that a federal top-up will apply starting in 2020 when the minimum national price hits CAD 30.