Pollution pricing: technical briefing

Implementing Canada’s plan to address climate change and grow the economy

Addressing climate change and growing the economy

Canada’s plan to fight climate change, build resilience to a changing climate, and create opportunities to grow the economy

Comprehensive set of actions across the economy

A price on carbon pollution is a central pillar of the Pan-Canadian Framework

Carbon pollution pricing is a common-sense way to reduce our emissions and protect our environment for our kids and grandkids

A price on carbon pollution creates incentives for individuals, households and businesses to build on investments they have already made to lower their emissions

Pricing carbon pollution will reduce emissions, drive innovation and help Canada compete in the emerging global low-carbon economy

The Pan-Canadian approach to pricing carbon pollution

Gave provinces and territories two years to implement their own carbon pollution pricing system that meets stringency criteria

Included commitment by the federal government to implement, in whole or in part, a carbon pollution pricing system in provinces and territories that request it and in those that do not have a carbon pollution pricing system that meets the federal benchmark

The federal carbon pollution pricing system

Under the Greenhouse Gas Pollution Pricing Act, adopted on June 21, 2018, the “backstop” has two parts:

  1. Regulatory charge on fuel – will apply starting in April 2019 in backstop provinces
  2. Regulatory system for large industry (the Output-Based Pricing System or OBPS) – will apply starting in January 2019 in backstop provinces

Both parts will apply on starting in July 2019 in Yukon and Nunavut

The Government of Canada is ensuring a price on carbon pollution across Canada in 2019

A map of Canada identifying the system chosen by provinces and territories.
Long description

Provincial or territorial system:

  • British Columbia
  • Alberta
  • Quebec
  • Nova Scotia
  • Prince Edward Island
  • Newfoundland and Labrador
  • Northwest Territories

Chose federal system, in whole or in part:

  • Yukon
  • Nunavut

Federal system applies, in whole or in part:

  • Saskatchewan
  • Manitoba
  • Ontario
  • New Brunswick

Carbon pollution pricing proceeds

Approach to carbon pollution pricing  proceeds

Provinces and territories with their own carbon pollution pricing systems can use proceeds to support their residents, grow the economy, and protect the environment

Proceeds from the “backstop” will be returned directly to the governments of provinces and territories that requested it

Returning proceeds in the remaining provinces

Saskatchewan, Manitoba, Ontario and New Brunswick

Fuel charge proceedsFootnote 1

Output-Based Pricing System proceeds

Canada Carbon Rebates

Individuals and families will claim their CCR when they file their tax returns (starting in early 2019), and will receive it as part of their tax assessment

Amounts will vary by province (depending on annual proceeds from the fuel charge in the province) and will vary by family size

Residents of small and rural communities will receive a 10% supplement

Average middle-class family will receive more in payments than the direct costs resulting from carbon pollution pricing

All proceeds will be audited and reported annually to ensure revenue neutrality and that they are returned to the jurisdiction of origin

For more information

Annexes

Climate change is affecting communities across Canada

A map of Canada with descriptions of how climate change affects communities across the country
Long description

North:

  • Reduced ice cover affecting economic development and traditional ways of life
  • Permafrost degradation affecting northern  infrastructure
  • Ecosystem changes / shifts in species distribution affecting country food supply and species at risk
  • Reduced reliability of ice roads affecting access to remote mine sites and northern communities

Western Canada:

  • Increased pests (pine beetle) affecting forest productivity and fire activity
  • Reduced glacier cover affecting western water resources and hydro production

Central Canada:

  • Increased frequency of drought affecting forests, agriculture
  • Lower Great Lakes water levels affecting shipping, hydro, and recreation

Atlantic Canada:

  • Sea level rise and increased coastal erosion affecting infrastructure
    Increased temperatures affecting human health due to heat stress and vector-borne diseases

A growing number of countries are putting a price on carbon pollution

State and trends of Carbon Pricing 2018
Long description

Emissions Trading System (ETS) implemented or scheduled for implementation:

  • Washington
  • California
  • Ontario
  • Quebec
  • Massachusetts
  • Regional Greenhouse Gas Initiative
  • European Union
  • Kazakhstan
  • Republic of Korea
  • Australia
  • Japan
  • China
  • New Zealand

Carbon tax implemented or scheduled for implementation:

  • Argentina
  • South Africa

ETS or carbon tax under consideration:

  • Northwest Territories
  • Saskatchewan
  • Manitoba
  • NB
  • NS
  • PEI
  • NL
  • Oregon
  • Virginia
  • Brazil
  • Rio de Janeiro
  • São Paulo
  • Côte d’Ivoire
  • Turkey
  • Thailand
  • Vietnam

ETS and carbon tax implemented or scheduled:

  • Iceland

Carbon tax implemented or scheduled, ETS under consideration:

  • Mexico
  • Colombia
  • Chile
  • Ukraine
  • Japan

ETS implemented or scheduled, carbon tax under consideration:

  • n/a

Pan-Canadian Framework – 4 Pillars

Pricing carbon pollution

Complementary mitigation actions across all sectors

Adaptation and climate resilience

Clean technology, innovation and jobs

Canada’s carbon pollution pricing system

Fuel production and distribution

Fuel consumption and heating fuel

OBPS Facility

Canada Carbon Rebate

Average cost impact per household* of the federal system**
Province 2019 2020 2021 2022
Ontario $244 $357 $463 $564
New Brunswick $202 $296 $386 $470
Manitoba $232 $342 $447 $547
Saskatchewan $403 $588 $768 $946
*Average household of 2.6 people
**For more information on these estimates, please see the Backgrounder: Fall 2018 Update – Estimated Impacts of the Federal Carbon Pollution Pricing System
Average Canada Carbon Rebate per Household*
Province 2019 2020 2021 2022
Ontario $300 $439 $571 $697
New Brunswick $248 $365 $476 $583
Manitoba $336 $495 $649 $797
Saskatchewan $598 $883 $1,161 $1,419

*Canada Carbon Rebates for 2020-2022 are illustrative and subject to change.

Amounts increase annually to reflect the increases in the federal carbon pollution price

Canada Carbon Rebate for a family of four
Province 2019 2020 2021 2022
Ontario $307 $451 $588 $718
New Brunswick $256 $377 $495 $607
Manitoba $340 $499 $654 $801
Saskatchewan $609 $903 $1,189 $1,459

* For more information on these estimates, please see the Backgrounder: Fall 2018 Update – Estimated Impacts of the Federal Carbon Pollution Pricing System.
** Canada Carbon Rebate for 2020-2022 are illustrative and subject to change.

Amounts increase annually to reflect the increases in the federal carbon pollution price

Support to universities, hospitals, schools, municipalities, non-profits, and Indigenous communities

Province 2019 to 2020 2020 to 2021 2021 to 2022 2022 to 2023 2023 to 2024 Total
Ontario $50 M $75 M $100 M $125 M $125 M $475 M
Saskatchewan $15 M $25 M $30 M $40 M $40 M $150 M
Manitoba $5 M $10 M $15 M $15 M $15 M $60 M
New Brunswick $3 M $4 M $5 M $5 M $5 M $22 M

Notes: Numbers under $5 M are rounded to the nearest M; those over $5 M are rounded to the nearest $5 M. Estimates beyond 2019-20 are illustrative and subject to adjustments as more information becomes available.

Support for small and medium-sized businesses

Province 2019 to 2020 2020 to 2021 2021 to 2022 2022 to 2023 2023 to 2024 Total
Ontario $105 M $155 M $205 M $255 M $255 M $975 M
Saskatchewan $30 M $45 M $60 M $80 M $80 M $295 M
Manitoba $15 M $20 M $25 M $35 M $35 M $130 M
New Brunswick $5 M $10 M $10 M $15 M $15 M $55 M

Note: Numbers under $5 M are rounded to the nearest million; those over $5 M are rounded to the nearest $5 M. Estimates beyond 2019-20 are illustrative and subject to adjustments as more information becomes available.

Where the federal system will apply

Federal fuel charge will apply in SK, MB, ON, NB

The federal system for large industry (OBPS) will apply in ON, MB, NB, PEI, YK, NU and partially in SK

Provincial systems will apply in BC, AB, QC, NS, NL, PEI

Territories

When the federal system apply

The federal system for large industry will apply in provinces  on January 1, 2019

Federal fuel charge will apply in SK, ON, MB, and NB on April 1, 2019

The Output-Based Pricing System

Will apply to large industrial emitters that compete internationally

Designed to incent reductions and innovation and maintain economic competitiveness

Industry motivated to reduce carbon pollution by:

Recognized as a best practice – similar mechanisms used around the world, including here in Canada

How the OBPS works

An emissions-intensity standard is set for a whole sector

Compliance obligations can be met by:

Creates a strong financial incentive for the least efficient facilities to reduce their emissions per unit of output and for strong performers to continue to improve

OBPS development next steps

Environment and Climate Change Canada will continue to engage industry and stakeholders as we develop the OBPS regulatory requirements

Next steps:

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