Mr. Speaker, the Greenhouse Gas Pollution Pricing Act, which received royal assent on June 21, 2018 as part of the Budget Implementation Act, 2018, No. 1, establishes the framework to implement the federal carbon pollution pricing system in provinces and territories that request it and in provinces and territories that do not have a system that meets the federal stringency requirements. The federal system has two components: a regulatory charge on fossil fuels, which is the “fuel charge”, and a trading system for large industry, which is the “output-based pricing system” or OBPS.
The federal fuel charge applies, as of April 1, 2019, in Ontario, New Brunswick, Manitoba and Saskatchewan; as of July 1, 2019, in Yukon and Nunavut; and, as of January 1, 2020, in Alberta. The government has announced its intention to no longer apply the fuel charge in New Brunswick, as of April 1, 2020, as the province proposed to implement a provincial carbon levy, as of that date, that meets the federal stringency requirements for the sources that it covers.
The federal fuel charge rates reflect a carbon pollution price of $20 per tonne of carbon dioxide equivalent, CO2e, as of April 1, 2019, which will rise by $10 per tonne annually until it reaches $50 per tonne in 2022.
The OBPS started applying in Ontario, New Brunswick, Manitoba, Prince Edward Island and partially in Saskatchewan on January 1, 2019, and in Yukon and Nunavut on July 1, 2019. Rather than paying the fuel charge, covered facilities provide compensation for the portion of their greenhouse gas or GHG emissions that exceeds their applicable emissions limit, based on an activity-specific output-based standard. If a covered facility’s GHG emissions exceed the prescribed emissions limit in a year, it may compensate for its excess emissions in three ways. It may submit surplus credits it earned in the past, or that it has acquired from other facilities; submit other prescribed credits that it acquired; or pay an excess emissions charge. The excess emissions charge rates reflect a carbon price of $20 per tonne of CO2e in 2019, and an increase of $10 per tonne annually until it reaches $50 per tonne in 2022.
First ministers have committed to reviewing carbon pollution pricing across Canada in 2022. This will inform the path forward and help ensure that carbon pollution pricing is fair and effective across Canada.