British Columbia, on the west coast of Canada, has been effectively pricing carbon since 2008 by way of a carbon tax. It has what is widely considered the most comprehensive pricing mechanism in North America – 70% of all GHGs are covered, and it raised $1.2 Billion (CAD) in the fiscal year 2013-2014. One tonne of GHGs was priced at $10 per tonne of GHG in 2008 with an annual increase of $5 to 2012. The price has been frozen since 2013 at $30, with a noticeable trend upward in BC’s GHGs since then.
The tax was designed to be “revenue neutral” – revenues earned by the tax were to be recycled back to taxpayers and businesses in the form of rebates. In reality, the tax has become “revenue negative” – a greater amount of rebates are currently issued in the name of the tax than the amount of revenue generated by it.
Alberta has had in place the SGER (Specified Gas Emitters Regulation) since 2007, a system which somewhat resembles a cap-and-trade mechanism. With regular cap-and-trade, an emissions cap is set across an economy and pollution permits are issued to meet that cap. The market determines the price based on the scarcity of those permits. SGER also includes the ability to purchase Alberta-based offsets, and the provision by the government of performance credits – effectively pollution permits that are issued to industry based on their ability to cut down on their emissions. It applies only to Alberta’s heavy industries (over 100,000 tonnes of emissions annually).
In November 2015, the Alberta government announced that it is replacing SGER with a new “Carbon Competitiveness Regulation” (CCR). CCR will be a “hybrid carbon pricing” policy – there is a differentiation between heavy industry (again, with over 100,000 tonnes of annual emissions) and the rest of the economy. Offsets and performance credits are both available. CCR expands carbon pricing into areas of the economy that were previously uncovered by SGER. They include electricity generation and transportation fuels, for instance. Revenue generated by the pricing regime will likely bump up from annual figures of around $77 Million to over $3 Billion by 2018.
Quebec signed-up to the Western Climate Initiative (WCI) in 2007, a collection of US states and Canadian provinces who are working together to implement emissions trading policies to tackle climate change as a region. At the centre of WCI’s strategy is a market-based cap-and-trade program that caps greenhouse gas emissions and uses tradable permits to incent development of renewable and lower-polluting energy sources.
Quebec linked its carbon market with California’s in 2014, with three successful joint auctions of pollution permits since then. Both jurisdictions apply their pricing mechanisms to an identical list of GHGs (CO2 and methane, for instance) and industrial sectors, with the emissions threshold of 25,000 annual tonnes of GHGs also common to both. Some oil refineries and auto plants have been granted exceptions by way of free allocations of pollution permits.
Ontario also signed-up to the Western Climate Initiative (WCI) in 2007, and entered-into a Memorandum of Understanding with Quebec on trading carbon in 2008. In 2015, the Ontario government released a discussion paper on its plans to fully join with Quebec and California to form a trading market, with the view to beginning trading in January 2017.
Ontario’s cap-and-trade mechanism will impose an economy-wide emissions cap for 2017. The cap will drop 3.7% each year for three years. The mechanism will have wide coverage, covering GHG sources such as transportation fuels.