Putting a Price on Carbon Pollution in Canada

Under Canada’s clean growth and climate action plan, provinces and territories have until September 1, 2018, to provide the federal government with a description of their first annual plan to price carbon pollution.

British Columbia put a price on carbon pollution more than a decade ago. Since 2008, British Columbia’s direct price on carbon pollution has reduced emissions by 5 to15%. (Source) Meanwhile, provincial real GDP grew more than 17% from 2007 to 2015 (Source), and gasoline demand dropped 15% over the same period. (Source)

A direct price is just one approach to putting a price on carbon pollution. Ontario’s cap-and-trade system, which sets limits on carbon pollution and allows companies to buy and sell permits for their greenhouse gas emissions, is projected to reduce greenhouse gas emissions by about 18 million tonnes in 2020, while the economy is expected to grow by nearly 11% compared to 2015 (Source).

The Pan-Canadian Framework on Clean Growth and Climate Change recognizes the flexibility of the provincial and territorial governments to design an approach to pricing carbon pollution that meets the federal standard in a way that works for their particular circumstances.

Governments can design their carbon pricing systems to avoid putting extra financial pressure on low-income and middle-class households by providing money-back rebates, cutting taxes or funding discounts on energy-saving programs and technology.

For instance, British Columbia has a low-income climate action tax credit that helps offset the cost of that province’s carbon price through direct payments to low-earning families. B.C. also returns revenue from its direct price to households and small businesses by cutting personal or corporate taxes. (Source)

In Alberta, approximately 60% of households receive full or partial rebates to offset the costs of the carbon levy. Single Albertans who earn less than $47,500/year and families who earn less than $95,000/year receive a full rebate to offset costs associated with the carbon levy. (Source)

Other provinces are using the revenues from carbon pricing to support clean growth – investing in public transit, energy efficiency, and other measures that help to reduce pollution and generate clean economic growth.

The federal carbon pricing system will come into effect by January 1, 2019, as a backstop in any jurisdiction that does not put its own carbon pricing system in place that meets the federal standard. All direct revenue from carbon pricing will go back to the jurisdiction of origin.

Analysis from Environment and Climate Change Canada shows that a price on carbon pollution is a critical piece of the plan to meet Canada’s international climate commitment under the Paris Agreement – eliminating 80-90 million tonnes of greenhouse gas emissions in 2022, which is equivalent to equivalent to taking between 23 and 26 million cars off the road for a year.