Government launches consultations on border carbon adjustments
August 5, 2021 - Ottawa, Ontario - Department of Finance Canada
Today, the Deputy Prime Minister and Minister of Finance, the Honourable Chrystia Freeland launched consultations on border carbon adjustments, in cooperation with the Minister of Environment and Climate Change, the Honourable Jonathan Wilkinson. To provide context, the government is also releasing today a paper that outlines foundational information and key considerations relating to border carbon adjustments.
Combatting climate change is a global imperative. Canada is doing its part by committing to ambitious climate targets and raising its price on carbon pollution to meet those targets. An emerging global challenge is how to address differing carbon prices among trading partners and more generally, differences in the tools nations use to address the challenge of climate change.
Border carbon adjustments can level the playing field by ensuring that imported goods are subject to the same carbon pricing as domestically produced goods and that exported goods are not disadvantaged in markets with lower, or no, carbon pricing. This, in turn, helps prevent potential carbon leakage, supports emissions reduction, and maintains Canada’s global competitiveness.
Work on international border carbon adjustments is in progress. An important part of advancing this work is ensuring a common understanding. To this effect, the government will continue its important conversations with Canadians and international partners, including the United States and European Union, in the coming months.
As announced in Budget 2021, the government will have targeted discussions with the provinces and territories, importers and exporters—especially those who deal in emissions-intensive goods—as well as other experts in the coming weeks. Throughout this process, the government will continue to advance its international engagement with key trading partners and other like-minded countries that are taking climate action. Broader public consultations with all interested Canadians will also take place this fall.
“Putting a price on carbon pollution is recognized as one of the most efficient ways to drive down emissions. And border carbon adjustments level the playing field between businesses from countries that have a price on pollution, as we do in Canada, and those that do not.
“Canada is already a world leader with its price on pollution, so border carbon adjustments will help maintain the competitiveness of our businesses and our workers. To this end, I already have been undertaking constructive bilateral conversations with our American and European Union partners.
“In the recent budget, we committed to launching a consultation process on border carbon adjustments and I look forward to receiving the views and input of Canadians.”
The Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance
“Canada’s transition to a low-carbon economy is essential to our health, safety and economy, and we are helping lead the world in showing how pricing pollution can play a central role in the fight against climate change. Border carbon adjustments have the potential to help Canada and other ambitious trading partners ramp up climate ambition by building pollution pricing into our trading relations in a way that is fair and predictable for firms and consumers, and that supports international competitiveness.”
The Honourable Jonathan Wilkinson, Minister of Environment and Climate Change
In the 2020 Fall Economic Statement, the government announced its intention to explore the potential of border carbon adjustments and work with like-minded economies to consider how this approach could help Canada meet its climate targets and ensure a fair environment for businesses.
Budget 2021 announced the government’s intent to launch a consultation process to ensure a common understanding of border carbon adjustments and hear views from interested Canadians.
On April 22, 2021, the Prime Minister announced Canada’s updated target of a 40-45% reduction of greenhouse gas emissions below 2005 levels by 2030. Canada formally submitted this new nationally determined contribution to the United Nations on July 12, 2021.
In July 2021, the government confirmed that Canada’s carbon price will continue to increase by $15 per year after 2022, until it reaches $170/tonne in 2030, in Canada’s Climate Actions for A Healthy Environment and a Healthy Economy.
Border carbon adjustments have four main inter-related objectives: reducing the risk of carbon leakage, maintaining the competitiveness of domestic industries, supporting greater domestic climate ambition, and driving international climate action.
- Carbon leakage happens when differences in carbon costs cause companies or investors to move production or their investments to jurisdictions with lower carbon prices, which undermines the urgent efforts to reduce overall global emissions.
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Deputy Prime Minister's Office
Department of Finance Canada
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