Background to Canada's National Carbon Policy
The recent federal plan for a national Canadian carbon price – rising to $50/+ CO2e by 2022 – has increased interest in carbon pricing policies and has highlighted the need to go beyond an initial headline number to determine the effective price of carbon. In light of a forthcoming national price on carbon, business, individuals and government must understand the "all-in costs" associated with carbon pricing in order to make sound strategic decisions. Our federal government should be mindful of the different ways in which a carbon price may impact the different regions of Canada and how different carbon levels may impact consumer and business behavior in different regions of Canada.
Ecofiscal Commission Report
Canada's Ecofiscal Commission has issued a timely report – which raises questions about the complexity, transparency and fungibility of carbon pricing policies. The Commission suggests looking beyond the headline number in order to determine the collective price imposed under a proposed carbon tax or a cap-and-trade emissions trading system (ETS).
Marginal Carbon Price
As the Commission notes, the simplest way to determine the effective price of carbon is to look at the marginal carbon price. The marginal carbon price is the price payable for emitting an incremental tonne of carbon. In the report, the Commission identifies the marginal carbon price under existing and proposed carbon pricing policies, enacted or proposed by the various Provinces as at July 2016 – before the Trudeau government announced its federal carbon pricing plan. The analysis performed by the Commission illustrates the conceptual issues underlying any effort, by the federal government or otherwise, to ascertain the effective price of carbon in a specific jurisdiction, and that the goal of consistency of carbon pricing across Canada is complicated. Below is the margin carbon price for the stated Provinces at the estimated future time.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
