LASER TALK: CCL Canada’s Carbon Pricing Criteria

In this next decade, CCL will continue to lobby for an effective and predictably-rising carbon pricing policy in Canada. Below are guidelines for what we consider essential next steps to secure a liveable world:

1.The climate crisis is a non-partisan issue. We recommend a framework for cross-party cooperation through legislation of science-based GHG reduction targets and successive short-term (5 years or less) GHG budgets, with mandatory public reporting on progress in meeting these targets and budgets. The United Kingdom’s Climate Change Act 2008 provides an example of legislation which implements these concepts.

2. Based on the urgency of the climate crisis, economic modeling, case studies, and the need for a clear multi-year framework that allows households and businesses to make long term plans, we recommend that Canada’s national Backstop carbon price continue to rise past 2022, to at least $210 per tonne by 2030—thus going up at a rate of at least $20 per tonne per year from 2022 to 2030.

3.We strongly support that the Fuel Charge component of the Federal Backstop provides a direct dividend to households (the Climate Action Incentive payment) to protect low and middle-income households from higher costs. It is imperative that Canada’s carbon pricing system be fair and revenue-neutral.

4.The connection between the carbon price Canadians pay under the Fuel Charge component of the Federal Backstop and their dividend, which is paid through an income tax rebate, is unclear to many Canadians. To be more efficient at building the political will for the rising Backstop carbon price, we strongly recommend that Canadians receive their Climate Action Incentive payments at least twice yearly through a dividend cheque or a direct deposit in bank accounts.

5. We ask that the carbon price be economy-wide with minimal, principled and transparent exceptions and that all measurable GHGs be priced.

6. We appreciate that Canada’s Output-Based Pricing System for large emitters is providing a market signal to reduce GHG emissions and protects these vulnerable industries from unfair foreign competition. The climate emergency requires coordinated global action. Thus, we view the Output-Based Pricing System as temporary because we need mechanisms to encourage foreign countries to adopt their own carbon fees. Specifically, we recommend that Parliament study Border Carbon Adjustments as soon as possible and follow closely what the European Union is doing. Canada should continue to build support for carbon pricing internationally as was done for the Declaration on Carbon Pricing in the Americas, then enact Border Carbon Adjustments in cooperation with climate-friendly trading partners  by 2022.

7. CCL’s stance has always been one carbon pricing policy for all of Canada. This is especially important in order to enact Border Carbon Adjustments which will require a uniform carbon price across Canada. Thus, we need the federal, provincial and territorial governments to cooperate in the development of a harmonized system of carbon pricing and if not possible, determine carbon pricing equivalencies between the different provincial and territorial carbon pricing mechanisms so that Canada can enact Border Carbon Adjustments.

8. We appreciate that the federal government has eliminated some fossil fuel subsidies since 2015, and recommitted to peer-review of Canada’s “inefficient” fossil fuel subsidies in 2018 at the G20 in Argentina after originally committing to doing so in 2009 at the G20 in Pittsburgh. Additionally, the Conservative Party of Canada during election 2019 indicated they might be supportive of eliminating some fossil fuel subsidies. We expect Canada to accelerate taking action as these subsidies are counterproductive, diminish public trust, and their removal has already been delayed for several years.

9. We appreciate that Canada is providing five million dollars for the World Bank’s Partnership For Market Implementation and also made a commitment of $300 million to the UN to the Green Climate Fund. We ask that Canada take even more leadership on tackling climate change globally, including by providing technical and financial support for the transition to clean energy economies in the Global South and by helping those most vulnerable adapt to changing conditions.

10. Overall, we recognize that carbon pricing needs to be woven into a comprehensive plan that includes:

  • broader regulations (e.g., building codes, fuel efficiency standards, land-use policies, and nature-based solutions);
  • infrastructure investment;
  • appropriate incentives;
  • financial mechanisms (e.g., green bank, green bonds, and rules requiring corporations to act responsibly on climate change, both for their communities and for their investors’ long-term interests);
  • tax reform to pay for the transition to the low carbon economy (Canada’s tax system has not had an overhaul in over 50 years. In August 2019, Chartered Professional Accountants Canada called for a tax overhaul towards a low carbon economy in its Budget 2020 recommendations).;
  • job retraining for workers in the fossil fuel sector;
  • education programs (e.g., how personal choices, such as food choices, impact the climate);
  • special considerations for farmers, Northern Communities, and Indigenous Peoples, including enshrining the United Nations of the Rights of Indigenous People (U.N.D.R.I.P.) under national law.

Although the societal wealth we currently enjoy would have been impossible without fossil fuels, we are transitioning out of a fossil fuel economy into a carbon-neutral economy. Strong policies are needed for such a transition to occur in the time that is available. This is where CCL contributes, to aid the timely implementation of these strong policies. Please work with us on our focus: a predictable and effective carbon pricing policy that leaves no one behind.

For a full explanation of our criteria please read our 2020 Carbon Pricing Guidelines.