Canada has identified carbon pricing as a primary tool to reduce emissions. While there are many government programs to encourage consumer choices to move away from carbon like ZEV rebates, energy efficiency programs, and transit investments, to name a few, it will be making emitting GHGs more expensive that drives the biggest reductions.
Canada has a patchwork of different pricing systems that vary from province to province. This is because while the Government of Canada has set a national price for carbon—currently $50/tonne and rising to $170/tonne by 2030—and allows individual provinces to implement it as they see fit. For those provinces that don’t, the federal government sets up a federal “backstop.” The federal backstop has two parts: a charge on fuel, and an “output based pricing system” (OBPS) for industrial users.
Carbon pricing has major implications for Canada’s electricity sector. In jurisdictions that rely heavily on emitting forms of electricity, it will add upfront costs to generation. Carbon pricing will also make other generation technologies more commercially viable, including emerging ones like CCUS and grid scale batteries. It will encourage investments in technologies that use fewer fossil fuels, meaning a greater demand for electricity generally. This will likely become more pronounced as the carbon price increases dramatically towards the end of the decade.
