Annex I: Federal investments and measures to support the transition to a low-carbon economy

Federal investments

The federal government will help catalyze the transition to a clean growth economy through significant new investments to complement provincial and territorial actions and investments, including investments in infrastructure, the Low-Carbon Economy Fund, and clean technology funding.

• Budget 2016 outlined a number of new federal investments that will support a transition to a low-carbon economy. Some of these investments include
  • $62.5 million to support the deployment of infrastructure for alternative transportation fuels, including charging infrastructure for electric vehicles and natural gas and hydrogen refueling stations, as well as demonstration of next generation recharging technologies;
  • $50 million over two years to invest in technologies that will reduce GHG emissions from the oil and gas sector;
  • $82.5 million over two years to support research, development, and demonstration of clean energy technologies with the greatest potential to reduce GHG emissions;
  • $100 million per year from the regional development agencies to support clean technology, representing a doubling of their existing annual aggregate support;
  • $50 million over four years to Sustainable Development Technology Canada (SDTC) for the SD Tech Fund. These resources will enable SDTC to announce new clean technology projects in 2016 that support the development and demonstration of new technologies that address climate change, air quality, clean water, and clean soil;
  • $40 million over five years to integrate climate resilience into building design guides and codes. The funding will support revised national building codes by 2020 for residential, institutional, commercial, and industrial facilities;
  • $129.5 million to implement programming focused on building the science base to inform decision making, protecting the health and well-being of Canadians, building resilience in the North and Indigenous communities, and enhancing competitiveness in key economic sectors; and
  • $10.7 million over two years to implement renewable energy projects in off-grid Indigenous and northern communities that rely on diesel and other fossil fuels to generate heat and power.
• Building on the infrastructure investments outlined in Budget 2016, the federal government has announced an additional $81 billion over 11 years for investments in public transit, social infrastructure, transportation that supports trade, Canada’s rural and northern communities, smart cities, and green infrastructure.
• Green infrastructure funding will support projects that reduce GHG emissions, enable greater climate change adaptation and resilience, and ensure that more communities can provide clean air and safe drinking water for their citizens. Specific projects could include interprovincial transmission lines that reduce reliance on coal, the development of new low-carbon/renewable power projects, and the expansion of smart grids to make more efficient use of existing power supplies.
• The federal government is proposing the creation of the Canada Infrastructure Bank that will work with provinces, territories, and municipalities to further the reach of government funding directed to infrastructure. The Canada Infrastructure Bank will be responsible for investing at least $35 billion on a cash basis from the federal government into large infrastructure projects that contribute to economic growth through direct investments, loans, loan guarantees, and equity investments.
• Funding under the $2 billion Low Carbon Economy Fund will begin in 2017. This Fund will support new provincial and territorial actions to reduce emissions between now and 2030. Projects will focus on concrete measures that generate new, incremental reductions, while considering cost-effectiveness.
• The Government has also committed more than $1 billion, over four years, to support clean technology including in the forestry, fisheries, mining, energy and agriculture sectors.

Federal carbon-pricing benchmark

The federal government outlined a benchmark for carbon pricing that reflects the principles proposed by the Working Group on Carbon Pricing Mechanisms and the Vancouver Declaration. Its goal is to ensure that carbon pricing applies to a broad set of emission sources throughout Canada with increasing stringency over time to reduce GHG emissions at lowest cost to business and consumers and to support innovation and clean growth.

The benchmark includes the following elements:

1. Timely introduction. All jurisdictions will have carbon pricing by 2018.
2. Common scope. Pricing will be based on GHG emissions and applied to a common and broad set of sources to ensure effectiveness and minimize interprovincial competitiveness impacts. At a minimum, carbon pricing should apply to substantively the same sources as British Columbia’s carbon tax.
3. Two systems. Jurisdictions can implement (i) an explicit price-based system (a carbon tax like British Columbia’s or a carbon levy and performance-based emissions system like in Alberta) or (ii) a cap-and-trade system (e.g. Ontario and Quebec).
4. Legislated increases in stringency, based on modelling, to contribute to our national target and provide market certainty.
   • For jurisdictions with an explicit price-based system, the carbon price should start at a minimum of $10 per tonne in 2018 and rise by $10 per year to $50 per tonne in 2022.
   • Provinces with cap-and-trade need (i) a 2030 emissions-reduction target equal to or greater than Canada’s 30 percent reduction target and (ii) declining (more stringent) annual caps to at least 2022 that correspond, at a minimum, to the projected emissions reductions resulting from the carbon price that year in price-based systems.
5. Revenues remain in the jurisdiction of origin. Each jurisdiction can use carbon pricing revenues according to their needs, including to address impacts on vulnerable populations and sectors and to support climate change and clean growth goals.
6. Federal backstop. The federal government will introduce an explicit price-based carbon pricing system that will apply in jurisdictions that do not meet the benchmark. The federal system will be consistent with the principles and will return revenues to the jurisdiction of origin.
7. Five-year review. The overall approach will be reviewed by early 2022 to confirm the path forward, including continued increases in stringency. The review will account for progress and for the actions of other countries in response to carbon pricing, as well as recognition of permits or credits imported from other countries.
8. Reporting. Jurisdictions should provide regular, transparent, and verifiable reports on the outcomes and impacts of carbon pricing policies.

The federal government will work with the territories to address their unique circumstances, including high costs of living, challenges with food security, and emerging economies.

Other recent federal measures

The federal government has recently announced new federal measures, including 

• During the North American Leaders Summit in June 2016, the federal government made joint commitments with the United States and Mexico to
  • phase out fossil fuel subsidies by 2025. The commitment was reaffirmed by G-20 countries in September 2016.
  • reduce methane emissions from the oil and gas sector by 40 to 45 percent below 2012 levels by 2025.
• On October 15, 2016, Canada signed onto the Kigali Amendment to the Montreal Protocol and committed to propose new regulations to significantly reduce HFC consumption and prohibit the manufacture and import into Canada of certain products containing HFCs. These proposed regulations were published on November 26, 2016. This is additional to measures already introduced to increase the recovery, recycling, and destruction of HFCs in refrigeration and air conditioning equipment and to established regulatory provisions for an HFC-reporting system.
• On November 17, 2016, Canada released its Mid-Century Long-Term Low-Greenhouse Gas Development Strategy. The mid-century strategy describes various pathways for innovative and creative solutions. Canada’s mid-century strategy is not a blueprint for action nor is it policy prescriptive. It is based on modelling of different scenarios and looks beyond 2030 to start a conversation on the ways we can reduce emissions for a cleaner, more sustainable future by 2050. As a result, it will be a living document.
• On November 21, 2016, the federal government announced that it would be amending its existing coal-fired electricity regulations to accelerate the phase out of traditional coal-fired electricity by 2030. The federal government also announced that, to support the transition away from coal towards cleaner sources of generation, performance standards for natural gas-fired electricity are also being developed.
• On November 25, 2016, the federal government announced that it will consult with provinces and territories, Indigenous Peoples, industries, and non-governmental organizations to develop a clean fuel standard. It is expected that once developed, a clean fuel standard would promote the use of clean technology and lower carbon fuels and promote alternatives such as electricity, biogas, and hydrogen.

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