Pan-Canadian Framework on Clean Growth and Climate Change

Canadian Federal Carbon Pricing System Comes into Force in Backstop Jurisdictions

The Canadian federal government is committed to pricing carbon emissions and advancing the objectives of the Pan Canadian Framework on Clean Growth and Climate Change. The main components of the federal carbon pricing backstop system are set out in the Greenhouse Gas Pollution Pricing Act, which was passed in June 2018:

federal fuel charge; and
an Output-Based Pricing System for large emitters, i.e. those facilities with emissions 50,000 tonnes of carbon dioxide equivalent.

On October 23, 2018, the federal government announced that the federal carbon pricing system would come into force in 2019 in so-called “backstop jurisdictions”, i.e. those jurisdictions that have either decided not to implement a carbon price or to implement a system that does not meet federal requirements (the key requirement being a price on carbon of $20 per tonne starting in 2019, increasing by $10 per tonne annually until it reaches $50 per tonne in 2022. The backstop jurisdictions include: Ontario, New Brunswick, Manitoba, and Saskatchewan. In October 2018, the Department of Finance released details about how proceeds from the federal carbon pricing backstop will be returned directly to residents of backstop jurisdictions through the Climate Action Incentive. Both Ontario and Saskatchewan have launched constitutional challenges to the federal government’s jurisdiction to impose the federal carbon pricing scheme on the provinces. Both cases are expected to be heard in 2019. In the meantime, the federal carbon pricing system will come into force as planned.

Alberta, British Columbia, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, Quebec and Yukon have either developed their own carbon pricing systems that meet federal requirements or chosen to adopt the federal backstop.

The following table summarizes the carbon pricing initiatives across all provinces and territories as of January 1^st, 2019:

Jurisdiction	Carbon Pricing Approach
British Columbia:	Carbon tax = $35 per tonne, which will increase by $5 per tonne on April 1, 2019 until it reaches $50 per tonne by 2021.
Alberta:	Carbon levy = $30 per tonne. No further increases planned at this time.
Saskatchewan:	The federal backstop will apply, in part, in Saskatchewan: · Saskatchewan will implement its output-based performance standards system on January 1, 2019 (applicable to industrial facilities that emit ≥25,000 tonnes of CO2e per year). · Federal OBPS will apply to electricity generation and natural gas transmission pipelines beginning January 1, 2019 (applicable to facilities from those sectors that emit ≥50,000 tonnes of CO2e per year, with the ability for smaller facilities that emit ≥10,000 tonnes of CO2e per year to voluntarily opt-in to the system). · Federal fuel charge to apply from April 2019.
Manitoba:	· Federal OBPS will apply from January 1, 2019 (applicable to facilities from those sectors that emit ≥50,000 tonnes of CO2e per year, with the ability for smaller facilities that emit ≥10,000 tonnes of CO2e per year to voluntarily opt-in to the system). · Federal fuel charge to apply from April 2019.
Ontario:	· Federal OBPS will apply from January 1, 2019 (applicable to facilities from those sectors that emit ≥50,000 tonnes of CO2e per year, with the ability for smaller facilities that emit ≥10,000 tonnes of CO2e per year to voluntarily opt-in to the system). · Federal fuel charge to apply from April 2019.
Québec:	Cap & Trade System – Allowance Price of CAD $20.27 (based on results of November 14, 2018 auction)
New Brunswick:	· Federal OBPS will apply from January 1, 2019 (applicable to facilities from those sectors that emit ≥50,000 tonnes of CO2e per year, with the ability for smaller facilities that emit ≥10,000 tonnes of CO2e per year to voluntarily opt-in to the system). · Federal fuel charge to apply from April 2019.
Nova Scotia:	Cap-and-trade program will start on January 1, 2019.
PEI:	The federal backstop will apply in PEI, in part: · A carbon levy on fuel will come into force on April 1, 2019. · Federal OBPS will apply from January 1, 2019 (applicable to facilities from those sectors that emit ≥50,000 tonnes of CO2e per year, with the ability for smaller facilities that emit ≥10,000 tonnes of CO2e per year to voluntarily opt-in to the system).
Newfoundland and Labrador:	Newfoundland & Labrador’s own carbon pricing plan came into force on January 1, 2019: · Provincial carbon tax rate of $20 tonne will commence on January 1, 2019. · A performance-based system for offshore and onshore industries will establish GHG reduction targets for large industrial facilities and large scale electricity generation; exemptions for certain sectors are available.
Nunavut:	· Federal OBPS will apply from July 1, 2019 (applicable to facilities from those sectors that emit ≥50,000 tonnes of CO2e per year, with the ability for smaller facilities that emit ≥10,000 tonnes of CO2e per year to voluntarily opt-in to the system). · Federal fuel charge to apply from July 1, 2019.
Yukon:	· Federal OBPS will apply from July 1, 2019 (applicable to facilities from those sectors that emit ≥50,000 tonnes of CO2e per year, with the ability for smaller facilities that emit ≥10,000 tonnes of CO2e per year to voluntarily opt-in to the system). · Federal fuel charge to apply from July 1, 2019.
Northwest Territories:	Northwest Territories will introduce a carbon tax on fuels starting July 1, 2019 = $20/tonne of GHG emissions; this will increase annually until it reaches $50/tonne.

Federal Government Announces Next Steps in Climate Change Plan, including Climate Action Incentive Payments

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.

Canadian Low Carbon Economy Challenge Launched

Low Carbon Economy Challenge was launched by the Honourable Catherine McKenna, Minister of Environment and Climate Change during the GLOBE Forum in Vancouver on the 14th of March 2018

The Low Carbon Economy Challenge is a major new federal funding program that will provide more than $500 million for projects that will generate clean growth and reduce greenhouse gas emissions in support of the Pan-Canadian Framework on Clean Growth and Climate Change.

The Challenge is broken into two streams:

Champions stream: The $450 million Champions stream will provide funding to all eligible applicants (provinces and territories, municipalities, Indigenous communities and organizations, businesses and not-for-profit organizations.) The Champions stream is now open for applications, with a deadline of May 14, 2018.

Partnerships stream: The $50M Partnerships stream is limited to Indigenous communities and organizations, small and medium-sized businesses, not-for-profit organizations and small municipalities. This stream will help ensure a broad range of Canadians are able to participate in the Challenge. The Partnerships stream will be open for applications later in 2018.

There will be a two-step application process for each stream: 1) Submit an Expression of Interest (EOI) and 2) Submit a detailed Formal Proposal. Applicants will only be invited to submit a formal proposal if their project meets the eligibility criteria outlined in the Applicant Guide.

GHG Accounting Services would be happy to assist you in your application and enable you to demonstrate the GHG emissions reductions impact of your project. Please do not hesitate to contact us.

Canadian Government sets internal emissions reduction target and establishes Centre for Greening Government – Walking the Talk

The Pan-Canadian Framework on Clean Growth and Climate Change (the Framework, released in December 2016) recognizes that while governments are directly responsible for a relatively small share of Canada’s emissions (about 0.6%), there is an opportunity for them to lead by example. A number of provinces are already demonstrating leadership, including through carbon neutral policies. For example, British Columbia’s (BC) public sector has successfully achieved carbon neutrality each year since 2010. Over the past 6 years, schools, post-secondary institutions, government offices, Crown corporations, and hospitals have reduced a total of 4.3 million tonnes of emissions through improvements to their operations and investments of $51.4 million in offset projects. BC was the first, and continues to be the only, carbon neutral jurisdiction in North America. Municipalities are also recognized as essential partners in emission reduction efforts – how cities develop and operate have an important impact on energy use, and therefore GHG emissions.

The Framework sets out an approach to government leadership, which includes (1) setting ambitious targets; (2) cutting emissions from government buildings and fleets; and (3) scaling up clean procurement.

To play its part, the federal government has announced that it will reduce its own greenhouse gas (GHG) emissions by 40% by 2030. In support of this goal, the Honourable Scott Brison, President of the Treasury Board, announced the creation of the Centre for Greening Government (the Centre) at the Treasury Board of Canada Secretariat in November 2016. The Centre will track the Government of Canada’s emissions centrally and coordinate efforts across government departments in order to ensure that the government’s objectives are met. Progress on emission reductions will be achieved by strategic investments in infrastructure and vehicle fleets, green procurement, and support for clean technology. Already, the federal government announced $2.1 billion in Budget 2016 towards repairs and retrofits to a wide range of government buildings, and to the greening of government operations.

The Centre’s work is rooted in the following Government of Canada commitments:

The Centre engages in the following government-wide activities:

analyzing and reporting;
providing policy and operational support;
setting requirements for federal organizations to deliver results and achieve performance goals; and
establishing communities of practice to identify best practices and lessons learned in greening actions from federal partners and provincial, territorial and other jurisdictions.

The federal government has indicated that it will immediately begin by aligning the way it measures GHG emissions with international standards to provide an accurate picture to measure the government’s progress.

The Centre is also working in close partnership with Environment and Climate Change Canada to further to goals of the 2016-2019 Federal Sustainable Development Strategy (FSDS), which was tabled in Parliament in October 2016. The Centre is the lead for Goal 2 of the FSDS: Low-carbon government.

Canada Moves Climate Change File Forward with Pan-Canadian Framework on Clean Growth and Climate Change

Canada wrapped up an eventful year 2016 on its climate change file. On the heels of the meeting of First Ministers in March 2016 (which resulted in the Vancouver Declaration), the federal government signed the Paris Agreement when it was opened for signature on 22 April 2016. Efforts continued on developing a pan-Canadian climate change strategy, which culminated in the announcement of a pan-Canadian carbon price on 3 October 2016, ratification of the Paris Agreement on 5 October 2016 and the release of the Pan-Canadian Framework on Clean Growth and Climate Change (the Framework) by the First Ministers’ following their meeting on 9 December 2016. Notably, Saskatchewan was the only province which declined to adopt the Framework.

The Framework is based on the principles set out in the Vancouver Declaration, which outlined a collaborative approach to meet or exceed Canada’s 2030 target of 30% below 2005 levels of greenhouse (GHG) emissions and enable sustainable growth, while recognizing the need for fair and flexible approaches to support the diversity of provincial and territorial economies. The Framework has four main pillars:

Pricing carbon pollution – an efficient way to reduce emissions, drive innovation, and encourage people and businesses to pollute less;
Complementary measures to further reduce emissions across the economy – such measures can address market barriers where pricing alone is insufficient or not timely enough to reduce emissions in the pre-2030 timeframe;
Measures to adapt to the impacts of climate change and build resilience – this will help to ensure that infrastructure and communities are adequately prepared for climate risks such as floods, wildfires, droughts and extreme weather events, particularly in Indigenous, northern, coastal and remote communities; and
Actions to accelerate innovation, support clean technology, and create jobs – by positioning Canada as a global leader in clean technology, Canada will remain internationally competitive and new jobs will be created across the country.

The Framework builds on provincial and territorial efforts to reduce GHG emissions and sets out actions under each of the Framework’s pillars. These actions include:

developing new building codes to ensure that buildings use less energy, thus saving money for households and businesses;
deploying more electric charging stations to support zero-emitting vehicles, which is an integral part of the future of transportation;
expanding clean electricity systems, promoting inter-ties, and using smart-grid technologies to phase out the reliance on coal, make more efficient use of existing power supplies, and ensure a greater use of renewable energy;
reducing methane emissions from the oil and gas sector;
protecting and enhancing carbon stored in forested lands, wetlands and agricultural lands; and
driving significant reductions in emissions from government operations.

To promote clean growth, the federal government (in collaboration with the provinces and territories) will be investing in green infrastructure, public transit, and clean technology and innovation, as well as promoting efforts to reduce the reliance of remote and northern communities on diesel by connecting them to electricity grids and implementing renewable energy systems.

Provincial and territorial officials have been tasked with implementing the Framework and will report back to the First Ministers within a year, and annually thereafter. Federal and provincial/territorial governments will also work together to establish a review of carbon pricing, including an assessment of stringency and effectiveness, which will be completed by early 2022; an interim report will be completed in 2020, which will assess approaches and best practices to address the competitiveness of emissions intensive, trade exposed (EITE) sectors. As noted above, the federal government announced a pan-Canadian carbon price in October 2016, which establishes a minimum price of $10 per tonne of carbon dioxide equivalent (CO₂e) in 2018, increasing by $10 each year until the carbon price reaches $50 per tonne of CO₂e by 2022. Pricing will be based on GHG emissions and applied to a broad set of sources; at a minimum, carbon pricing should apply to substantively the same sources as BC’s carbon tax. Provinces and territories must implement carbon pricing in their jurisdictions by 2018, either in the form of a carbon tax or a cap-and-trade system. Where a jurisdiction fails to meet the carbon price benchmark, the federal government will introduce a carbon pricing system into such jurisdiction and return the revenues to it. Further, provinces with cap-and-trade need (i) a 2030 emissions reduction target, and (ii) declining annual caps to at least 2022 that correspond, at a minimum, to the projected emissions reductions resulting from the carbon price that year in price-based systems.

As the provinces and territories work to implement the Framework, all levels of government will need to seek input from subject matter experts and stakeholders to ensure informed decision making and the use of best practices. Stay tuned for further developments.