On October 23, 2018, the federal government announced that it is moving forward with the next steps in its Pan-Canadian Framework on Clean Growth and Climate Change (the Framework), including a price on carbon. In January 2018, the government released the Greenhouse Gas Pollution Pricing Act, which set out a carbon pricing system based on a two-pronged approach: (1) a charge on fossil fuels that are consumed within a province or territory (which will generally be paid by fuel producers and distributors), which will be administered by the Canada Revenue Agency; and (2) an output-based pricing system (OBPS) that will apply to emissions-intensive industrial facilities, which will be administered by Environment Canada and Climate Change (ECCC).
Under the Framework, provinces and territories have the flexibility to design their own carbon pricing systems. The federal government’s plan requires provinces and territories to implement a carbon price of $20 per tonne of CO2e starting in 2019, which will increase by $10 per tonne annually until it reaches $50 per tonne in 2022. BC, Alberta, Newfoundland & Labrador, Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, Quebec and Yukon have all adopted carbon pricing systems that meet the federal benchmark. Four provinces – Ontario, New Brunswick, Manitoba and Saskatchewan – have decided either not to implement a carbon price or they have implemented system which do not meet federal standards. As a result, they will have the federal carbon pricing backstop implemented in their jurisdictions on January 1, 2019. As part of the federal government’s announcement, the Department of Finance Canada released a set of draft regulatory proposals under the Greenhouse Gas Pollution Pricing Act. The federal government will return the proceeds of the federal carbon pricing system to the province or territory of origin:
- directly to the governments of those jurisdictions that choose to adopt the federal system;
- directly to individuals and families, through the proposed Climate Action Incentive payments, as well as to particularly affected sectors in those other jurisdictions that do not meet the federal standard (i.e. Ontario, New Brunswick, Manitoba and Saskatchewan); and
- proceeds from the OBPS in Ontario, New Brunswick, Manitoba and Saskatchewan will be returned to the province of origin (the mechanism by which such proceeds will be returned will be determined at a later date).
The federal government has committed to provide annual updates on how the proceeds of the federal carbon pricing system were allocated.
Finance Canada also released the following details on the application of the federal backstop in the four provinces that do not have carbon pricing systems in place that meet federal requirements:
- The fuel charge rates that will apply starting in 2019. For example, in 2019, the price on gasoline will be $0.0442 per litre and the price on aviation turbo fuel will be $0.0516 per litre, both based on a carbon price of $20 per tonne. The fuel charge will come into effect on April 1, 2019.
- The proceeds from the fuel charge that forms part of federal carbon pollution pricing system will be returned directly to individuals and families through Climate Action Incentive These payments will be delivered as part of federal tax returns, and the government has indicated that most people should receive more in rebates than they pay as a result of the fuel charge.
- There will be some exemptions and/or supplements from the fuel charge for greenhouse operators and power plant operators that generate electricity for off-grid communities, which will include farmers, fishers and residents of rural and remote communities.
- The federal government has also announced that it will provide support to municipalities, universities, colleges, schools, colleges, hospitals, non-profits and Indigenous communities that incur an additional cost as a result of pricing carbon pollution. Finance Canada has provided estimates of support available for municipalities, public sector organizations and Indigenous communities in each of the four provinces:
| Table 1: Estimated Support for Municipalities, Universities, Schools and Colleges, Hospitals, Non-Profits, and Indigenous Communities, 2019-20 to 2023-24 | ||||||
| Province | 2019-20 | 2020-21 | 2021-22 | 2022-23 | 2023-24 | Total |
| Ontario | $50 million | $75 million | $100 million | $125 million | $125 million | $475 million |
| Saskatchewan | $15 million | $25 million | $30 million | $40 million | $40 million | $150 million |
| Manitoba | $5 million | $10 million | $15 million | $15 million | $15 million | $60 million |
| New Brunswick | $3 million | $4 million | $5 million | $5 million | $5 million | $22 million |
| Note: Annual amounts under $5 million are rounded to the nearest million; those over $5 million are rounded to the nearest $5 million. Estimates are illustrative and subject to adjustments as more information becomes available. Costs to administer the support are not included in the above figures and will be borne by the Government of Canada. | ||||||
In addition, universities, schools and hospitals can seek funding from the Low Carbon Economy Fund (LCEF) for GHG emission reduction initiatives under both the Low Carbon Economy Leadership Fund and the LCEF Challenge.
- In recognition of the importance of small and medium-sized enterprises (SMEs), the federal government has committed to providing additional support to help them take climate action. To that end, Finance Canada has provided estimates of support available for SMEs in each of the four provinces:
| Table 1: Estimated Support to Small and Medium-Sized Businesses, 2019-20 to 2023-24 | ||||||
| Province | 2019-20 | 2020-21 | 2021-22 | 2022-23 | 2023-24 | Total |
| Ontario | $105 million | $155 million | $205 million | $255 million | $255 million | $975 million |
| Saskatchewan | $30 million | $45 million | $60 million | $80 million | $80 million | $295 million |
| Manitoba | $15 million | $20 million | $25 million | $35 million | $35 million | $130 million |
| New Brunswick | $5 million | $10 million | $10 million | $15 million | $15 million | $55 million |
| Note: Numbers are rounded to the nearest $5 million. Estimates are illustrative and subject to adjustments as more information becomes available. Costs to administer the support are not included in the above figures and will be borne by the Government of Canada. | ||||||
Under the LCEF, the federal government has so far contributed over $300 million to provincial/territorial programs for eligible SMEs including energy retrofits, energy efficient equipment upgrades and fuel switching.
Further design details on the various support programs will be outlined in early 2019. Finance Canada is accepting comments on the draft regulatory proposals until November 23, 2018.
With respect to the OBPS, the government has indicated that draft regulations will be released in the next few weeks. Impacted industrial facilities in the four provinces that are subject to the federal OBPS will need to register by December 31, 2018.