Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Canada's Greenhouse Gas Pollution Pricing Act can move forward
06 April 2021Kari Pries, Ph.D.
The Supreme Court of Canada affirmed the constitutionality of
the "Greenhouse Gas Pollution Pricing Act" on 25 March, stating
that climate change had implications extending beyond provincial
boundaries and constituted a national concern as defined under the
clause of "peace, order and good government" outlined in sections
91 and 92 within Canada's Constitution.
The Court's ruling affirms the federal government's
authority to act in cases of national interest. The ruling
came in response to a court challenge brought by the provinces of
Alberta, Ontario, and Saskatchewan. At issue was whether the
federal government had the authority to implement its 2018
"Greenhouse Gas Pollution Pricing Act" which requires provinces to
meet minimum national standards to reduce greenhouse gas (GHG)
emissions through the implementation of pricing regulations on the
use of hydrocarbon fuels by large industries or consumers. The
Court found that GHG emissions met the criterion of having
extra-provincial or cross-boundary implications justifying federal
intervention. The legislation does not limit the provinces from
implementing their own emissions management schemes but rather
functions as a backstop to ensure all provinces implement
"sufficiently stringent" regulatory measures to reduce total GHG
emissions in keeping with nationally set benchmarks and
international treaty commitments, such as the 2015 Paris
Agreement.
Confirmed constitutionality of federally mandated
minimum requirements for carbon pricing to improve regulatory
stability for industries across Canadian provinces. The
ruling means that the federal government can implement its planned
increases in carbon pricing under the 2018 Greenhouse Gas Pollution
Pricing Act (GGPPA), establishing annual increases from USD38.8 per
tonne of CO2 emissions in 2022 to USD132.1 per tonne in 2030.
Rather than continue the federal backstop carbon pricing mechanism
which redistributes resulting revenues directly to consumers
through personal income tax and benefits returns, Saskatchewan and
Ontario are likely to introduce provincial carbon pricing schemes
which will result in revenues being collected by those provincial
governments, giving them greater discretion on how pricing schemes
are managed, including how revenues are returned to consumers.
Alberta Premier Jason Kenney has indicated that his government will
study carbon pricing options and implement a provincial scheme if
one can be designed that proves less costly than the federal
backstop for consumers although they have not yet considered what
that model would look like; Alberta already has a provincial
output-based pricing system (OBPS) in place for industrial emitters
in line with federal standards.
New government programs for investment in Canadian-based
clean energy technologies and carbon capture, utilization, and
storage (CCUS) innovations likely. Alberta is likely to
continue pushing for CAD30 billion in federal investments for
emissions-reducing technologies for resource extraction facilities,
electricity generation, and other industrial sites with an emphasis
on CCUS as announced in March 2021. British Colombia announced on
26 March new provincial emissions targets, seeking specified
reductions by 2030 against the benchmark of 2007 pollution levels.
The measure is broad-based, spanning oil and gas, transportation,
industry, and communities with target cuts ranging from 33-38% for
oil and gas to up to 64% for buildings and local communities
through improved building efficiencies and retrofit programmes. To
avoid deficit financing and limit the potential drag on national
GDP growth during the transition to lower GHG emissions
technologies, the federal government is likely to refocus existing
funding programmes like the "Investing in Canada"
USD142.95-billion, 12-year infrastructure scheme to fund
low-emissions transition efforts.
Carbon pricing costs for the agricultural sector are
likely to be offset by subsidies or tax benefits with moderate
risks of reducing rebate capacities for consumers. IHS
Markit does not assess a significant change to its GDP growth and
inflation projections for Canada following the Supreme Court
decision. In specific cases, like the agricultural sector, where
contributions to GDP growth are likely to be affected by increasing
production costs - the Agricultural Producers Association of
Saskatchewan (APAS) has forecast wheat production cost increases
from USD0.83 per acre in 2021 to USD3.53 per acre in 2030 as a
result of carbon pricing - the government is likely to consider
targeted exemptions in its April budget or through the passage of
targeted legislation (Bill C-206).