On December 9, 2016, Canada’s first ministers (with some exceptions) announced that they had signed on to a national strategy to combat climate change. The Pan-Canadian Framework on Clean Growth and Climate Change (PDF, the “Pan-Canadian Framework”) is intended to ensure Canada meets or exceeds its 2030 goal of reducing greenhouse gas emissions by 30 per cent below 2005 levels, as promised at the 2015 U.N.-sponsored climate change summit.

The Pan-Canadian Framework has four main pillars:

  • Pricing Carbon Pollution – identified as an efficient way to reduce emissions, drive innovation and encourage people and businesses to pollute less.
  • Complementary Climate Actions – aimed at addressing market barriers to emission reductions where carbon pricing alone is insufficient. These measures will include tightening energy efficient standards and codes for vehicles and buildings.
  • Adapt and Build Resilience – ensuring infrastructure and communities are adequately prepared for climate risks like floods, wildfires, droughts and extreme weather events.
  • Clean Technology, Innovation and Jobs – actions to position Canada as a global leader on clean technology innovation and jobs will bring new Canadian technologies to expanding global markets.

The Pan-Canadian Framework is opposed by Saskatchewan Premier Brad Wall, who dismisses carbon pricing outright. Manitoba Premier Brian Pallister also refused to sign on, indicating Manitoba would be taking a “wait and see” approach and withholding support until a better deal on federal health care transfers was settled.

Carbon Pricing

With respect to carbon pricing, the Pan-Canadian Framework sets out a number of guiding principles, including:

  • the approach should be flexible and recognize carbon pricing policies already implemented or in development by provinces and territories
  • carbon pricing should be applied to a broad set of emission sources
  • policies should minimize competitiveness impacts, particularly for emissions-intensive, trade-exposed sectors
  • policies should include revenue recycling to avoid a disproportionate burden on vulnerable groups and Indigenous Peoples

Based on those principles, the Pan-Canadian Framework also calls for the following actions on carbon pricing:

  • All jurisdictions will have carbon pricing by 2018, either through a carbon tax or levy or equivalent, or through a cap-and-trade system. A tax must be at least $10/tonne in 2018 and rise by $10/year to $50/tonne by 2022. Cap-and-trade systems must have a 2030 target equal to or greater than Canada’s 30 per cent reduction target and declining annual caps to at least 2022 that correspond, at a minimum, to projected emission reductions resulting from the carbon price in carbon tax systems.
  • Coverage among jurisdictions will be similar and, at a minimum, will apply to substantively the same sources as British Columbia’s carbon tax
  • Each jurisdictions can use carbon-pricing revenues according to their needs, including to address impacts to vulnerable populations and sectors.

Complementary Climate Actions

The Pan-Canadian Framework would also see federal, provincial and territorial governments working together on a number of complementary policies focused on greenhouse gas (GHG) reductions, including in the energy, building, industrial and transportation sectors. In the energy sector the approach is to include:

  • increasing generation from renewable and non-emitting energy sources
  • connecting clean power sources across Canada to places that do not have access to clean power through new and stronger transmission lines and interconnections
  • modernizing electricity systems with energy storage, updating infrastructure and smart grid technologies to improve reliability and allow for the integration of more intermittent renewable power sources
  • connecting off-grid communities reliant on diesel generation, improving diesel efficiency or replacing diesel generation with renewable energy systems

In the building sector the Pan-Canadian Framework calls for improving the energy efficiency of buildings, appliances and equipment through the adoption of more stringent building codes and standards. Industrial sector initiatives will include measures intended to reduce methane and hydrofluorocarbon (HFC) emissions, improving efficiency and investing in new technologies.

The transportation sector approach will include:

  • setting and updating vehicle emission standards
  • putting more zero-emission vehicles on the road by working together with private-sector partners to accelerate the deployment of supporting infrastructure like charging stations
  • enhancing investments in public transit upgrades and expansions, building more efficient trade and transportation corridors
  • developing a clean fuel standard

Complementary actions in the forestry, agriculture and waste sectors are also planned. See the Pan-Canadian Framework for full details.

Change to Carbon Reporting

At the same time, Environment and Climate Change Canada (“ECCC”) recently published a notice with respect to reporting of GHGs for 2016 indicating it plans on changing GHG reporting requirements, including by lowering the reporting threshold from 50,000 to 10,000 tonnes of CO2 equivalent. That will extend the current reporting obligation to considerably more businesses across Canada. ECCC intends to consult with stakeholders early next year on the change. Interested parties and stakeholders will find information on how to get involved on the Greenhouse Gas Emissions Reporting Program website.

Conclusion

While the Pan-Canadian Framework has been hailed as a significant step forward towards a comprehensive Canadian climate change plan, differences remain even among the participating governments. British Columbia is concerned around the equivalency of its carbon tax when compared against the cap-and-trade programs being adopted by Ontario and Quebec, and in particular whether the carbon tax will impose a higher compliance cost on British Columbia than the other jurisdictions. To secure British Columbia’s endorsement, the Pan-Canadian Framework requires an outside report to evaluate the effectiveness and comparability of the different carbon pricing mechanisms, with an interim report due in 2020 and a final report in 2022. Unless these reports find pricing equity between the regulatory regimes, the adoption of higher carbon pricing or more stringent targets beyond 2020 could still be the subject of some debate.