Federal Government Releases Proposals for Carbon Pricing

On January 15, Minister of Environment and Climate Change Catherine McKenna and Minister of Finance Bill Morneau released draft Legislative Proposals relating to the proposed federal carbon pricing system for public comment.

The Greenhouse Gas Pollution Pricing Act would apply in provinces and territories that request it and in those that don’t have a system in place that meets the federal standard in 2018.

Provinces that already have a carbon tax, such as British Columbia and Alberta, or have a carbon price through a cap and trade system, such as Ontario and Quebec, will not be affected. However, the federal government plans to introduce new legislation and regulations to implement a carbon pollution pricing system – the Backstop – to be applied in jurisdictions that do not have carbon pricing systems that align with the federal carbon pricing benchmark.

All elements of the Backstop will apply in a jurisdiction that does not have a carbon pricing system in place. The Backstop will also supplement (or "top-up") systems that do not fully meet the benchmark. 

On January 15, the federal government also released for comment, a Regulatory Framework describing the proposed federal approach to carbon pricing for large industrial facilities. 

This component of the federal pricing system would create a price incentive for large industrial facilities to reduce emissions while limiting the potential impacts of carbon pricing on their international competitiveness. The system is designed to reward facilities with efficient operations and support clean innovation. 

The documents represent the next step in the development of the federal system, and they are a follow-up to a technical paper on federal carbon pricing released in May 2017. The Technical Paper outlined how the federal carbon tax will be implemented, including how the levy will be applied to fossil fuels, such as gasoline, diesel, and propane starting in 2018. The levy on emissions from industrial facilities will not start before January 2, 2019 and will only apply to facilities that emit more than 50 kilotonnes or more of greenhouse gases per year.

The CPA is reviewing the draft legislation and the proposals for carbon pricing for large industrial facilities.