BRITISH COLUMBIA
ALBERTA
ONTARIO
QUEBEC
Carbon Tax
Carbon Tax
Cap & Trade
Cap & Trade
70%
78%
82%
85%
type of regime
coverage: greenhouse gases included in 2020
marginal price vs. coverage weighted price
30
$ greenhouse gas reductions in 2020 compared to no regime
21
$
5-15% source:
All in province
$
30 $23.40
$
19.40 $15.91
$
7%
11%
15%
source:
All in province
source:
80% imported
19.40 $16.49
source:
80%+ imported
revenue neutrality
Full
Partial
No
No
High
Medium
Low
Low
transparency
Benchmark
Good Needs Improvement Insufficient
CANADIAN CARBON PRICING REPORT CARD EXECUTIVE REPORT Canada’s First Ministers adopted a Pan-Canadian Framework on Clean Growth and Climate Change in December, 2016, which outlines the plans of federal and provincial governments to meet Canada’s greenhouse gas (GHG) reduction target of a 30 percent reduction from 2005 levels by 2030. The success of Canada’s GHG reduction plan depends on provincial action. By 2018, the federal government will ensure that all provinces put in place a price on carbon either through a cap-and-trade system or by a direct price on GHG emissions, such as a carbon tax. With Ontario and Alberta launching carbon pricing systems in January, 2017, four Canadian provinces— together accounting for close to 80% of Canadian GHG emissions—have pricing systems in place. British Columbia (2008) and Alberta (2017) have introduced carbon taxes while Quebec (2013) and Ontario (2017) have introduced cap-and-trade systems. The four provinces vary from one another in their emissions profiles and in the design and scope of their respective carbon pricing regimes. Given this diversity, a direct comparison is difficult. But as Canada’s six other provinces and three territories prepare to implement carbon pricing systems of their own—or face a backstop federal pricing system—it is important to look at the strengths and weaknesses of the various systems already in place. Canadians for Clean Prosperity has prepared this report card comparing Canada’s four carbon pricing systems.
Our comparison focuses on the following five factors: price, coverage, emissions reductions, revenue neutrality, and transparency. First, with regard to price, British Columbia’s is currently the highest, with a price of $30 per tonne through its carbon tax. Alberta has a price of $20 this year which will reach $30 in 2018. Ontario’s and Quebec’s cap and trade systems are expected to have a lower carbon price for the next number of years. Second, with respect to coverage, some kinds of greenhouse gas emissions are harder to measure and price than others, and none of the provincial carbon pricing regimes fully covers all such emissions. British Columbia has the lowest percentage of GHG emissions at 70% and Quebec covers the highest at 85%. When price and coverage are looked at together, Alberta’s new policy will be the most stringent by 2020, with the highest “coverage weighted” carbon price. Third, concerning reductions, even with Canada’s four largest provinces having carbon pricing in place, Canada is not on track to achieve our 2030 reduction targets with GHG emissions set to rise by 768 megatonnes by 2020 and 815 megatonnes in 2030. However, these regimes are expected to have some effect: all four provinces are projected to have emissions reductions in the range of 5 to 15 percent by 2020 compared the emissions that would have occurred if they had not introduced any carbon pricing regime. It should be noted, however, that Quebec and Ontario anticipate achieving the majority of their emissions reductions by importing allowances from California, not domestic reductions. Fourth, revenue neutrality is the principle that all carbon revenues are returned to consumers and businesses as tax cuts or tax credits.
To learn more, visit cleanprosperity.ca
Clean Prosperity sees revenue neutrality as a key principle in carbon pricing, as it can allow a high enough carbon price to create a strong incentive for emissions reductions while also ensuring a growing, competitive economy. Ontario and Quebec do not have revenue neutrality, and are planning on spending all carbon revenues on other environmental programs. Alberta is planning on returning about one-third of carbon tax revenues for rebates to lower income households and tax cuts for small business. British Columbia is the only province which has a policy of full revenue neutrality. Finally, with respect to transparency, there are opportunities for improvement. Alberta is experiencing some growing pains with businesses not knowing how to calculate carbon costs, and Ontario is unwilling to list carbon costs as a separate line item on gas bills. In Quebec, meanwhile, observers would like more visibility on how the government allocates allowances to industries. British Columbia’s carbon tax—well established and clearly visible—is the most transparent of the four regimes. Here are some takeaways from Clean Prosperity’s analysis: It’s good that four provinces producing most of Canada’s greenhouse gas emissions have started along the path of carbon pricing. Every province will need to achieve its own reductions for Canada to achieve its national target, and we have a long way to go. Comparing the various regimes brings various design options into clearer focus. From Clean Prosperity’s standpoint, broad coverage, high price, revenue neutrality and transparency are key ingredients for long-term success.
