Canada Sets Minimize Carbon Pricing Starting at $10/tonne in 2018, increasing to $50/tonne in 2022

Oct 3, 2016


There was a surprise announcement today, Canada introduced minimum carbon pricing for all provinces starting in 2018. [LINK] It was not expected that Canada would just announce this given they were supposedly working with the provinces on this issue. It isn’t a surprise that there are some immediate negative responses from provinces, who did not know it was coming.

Carbon pricing starts Jan 1, 2018 at $10/tonne, and increases each year by $10/tonne to reach $50/tonne for Jan 1, 2022. Here is how it compares to the Alberta and BC carbon tax rates.

oct3-chart-1
Canada says provinces can decide if they want carbon tax or cap and trade. Also that the revenues from carbon pricing stays within the province, and provinces decide how to use the revenues

There was additional insight in the backgrounder “At a minimum, carbon pricing should apply to substantially the same sources as British Colombia’s carbon tax”. Below I pasted in the BC carbon tax and sources. Note that 5.70 cents/cubic metre for natural gas is equal to $1.49/gj.

oct3-chart-2

Source: British Columbia http://www.fin.gov.bc.ca/tbs/tp/climate/A4.htm

It is an understatement is that Sask is not happy. Sask Premier Brad Walls issued a press release saying (i) I cannot believe that while the country’s environment ministers were meeting on a so-called collaborative climate change plan, the Prime Minister stood in the House of Commons and announced a carbon tax unilaterally. This meeting is not worth the CO2 emissions it took for environment ministers to get there.” (ii) “This is a betrayal of the statements made by the Prime Minister in Vancouver this March”. (iii) “ The carbon tax will siphon over $2.5 billion from Saskatchewan’s economy when fully implemented” (iv) “We estimate the carbon tax will cost the average family $1,250 a year.” (v) “In the coming weeks, Saskatchewan will investigate all options to mitigate the impact of one of the largest national tax increases in Canadian history.”

Alberta says it will not support without moving on infrastructure. Alberta Premier Notley issued a press release saying “With regard to the federal government’s proposals today, Alberta will not be supporting this proposal absent serious concurrent progress on energy infrastructure, to ensure we have the economic means to fund these policies”.
Absent Sask fighting and winning, I would expect to see this ultimately get implemented. Climate change and carbon pricing seems to be embedded in our society now. But I think the negotiation will be on the level of the carbon price and the timing of rate increases therefrom. This is like the comment I made in the Oct 2, 2016 Energy Tidbits memo and in the draft of my upcoming Oct 11 Vancouver speech – in a world of low economic growth, it makes it difficult to enact costly climate change items in the original timing and scope.