A comparison of the various output-based pricing systems (OBPSs) for carbon emissions from large emitters gives top marks to British Columbia, and a failing grade to Ontario. The findings in a new report, “Carbon Emissions: Who makes big polluters pay”, from the Pembina Institute compared the federal OBPS backstop to actual or proposed systems in British Columbia, Alberta, Ontario and New Brunswick.
Of those four provinces, Alberta and Ontario are noteworthy because both provinces have proposed new OBPSs to replace systems that had been judged strong enough to avoid imposition of the federal backstop. British Columbia’s system meets federal criteria and New Brunswick Premier Blaine Higgs has promised to develop a provincial system that matches the federal OBPS following the October 2019 federal election, in which the Liberals won six of 10 seats in the province.
The federal government must now decide if the proposed systems for Alberta and Ontario are sufficiently stringent to exempt those provinces from the federal OBPS backstop. That backstop was imposed on Ontario in January 2019 after it cancelled its cap-and-trade program. Alberta is still governed by the Carbon Competitiveness Incentive Regulation (Alta. Reg. 255/2017) brought in by the former government, but that regulation is slated to be replaced on January 1, 2020.
Alberta’s new system proposes a carbon price of $30 per tonne and is silent on the issue of annual increases to $50 per tonne, which the federal benchmark requires. Ontario is proposing a price $10 below the federal price from 2020 to 2022. However, Alberta has not firmly closed the door on annual price increases, and recent news reports have suggested the province may consider annual hikes in return for stronger assurances from Ottawa that the Trans Mountain Pipeline expansion will move ahead quickly.
Both Alberta and Ontario are proposing emissions benchmarks (the emissions intensity that triggers the imposition of the carbon price) that use a mix of sector-specific and facility-based standards. Sector-specific standards are better at rewarding top performers and punishing laggards.
Alberta’s system will include a high-performance standard intended to reward top performers and new facilities. By contrast, Ontario plans to use sector-specific standards for only 13 industrial activities. Facility-based standards will apply to about 80.
Alberta also proposes that 90% of emissions from large emitters will be free. This is less demanding than current requirements, and weaker than the federal backstop, but still better than what is being proposed in Ontario, where 95% to 100% of emissions would not be priced.
Pembina’s conclusion is that Ontario’s proposed system is by far the weakest when compared with the federal backstop.
Alberta’s is also weaker, but it has stated an objective of designing a system that will be acceptable to Ottawa.