All Canadian jurisdictions will have carbon pricing in place by 2018 at a minimum of $10 per tonne of CO2 emissions. Earlier this week, the federal government released details of a national minimum carbon price. The government had previously announced that it would impose a national minimum carbon price, but had not shared what that price would be. The federal minimum will increase by $10 each year to reach $50 per tonne by 2022.
Provinces and territories will have a choice of how to implement pricing – carbon tax or cap and trade. However, any provincial program will have to meet the federal minimum pricing. If a province or territory fails to implement a program by 2018, the federal government will impose its pricing. Revenues from the federally-imposed pricing will stay in the province or territory and it will be up to those governments to decide how to spend it.
Responses to the national carbon price from the provinces and territories has been mixed. Saskatchewan premier Brad Wall previously suggested that any unilateral federal carbon tax plan would be subject to a constitutional challenge. Saskatchewan does not currently have any form of carbon pricing in place. The government of Alberta is making its support of the national carbon price conditional on federal approval of pipelines. Alberta’s own carbon tax of $20 per tonne will come into effect January 1, 2017 and will increase to $30 per tonne in 2018.
Two days after the announcement of the national carbon price, the government formally ratified the Paris climate accord. Under the accord, Canada commits to reducing GHG emissions by 30 percent from 2005 levels by 2030. The national minimum price at the levels proposed will help Canada meet its Paris commitments, but is not considered by observers to be sufficient to ensure significant emission reductions.
The federal government plans to review the effectiveness of the program and future pricing in 2022.