Technical Paper on Pan-Canadian Carbon Pricing

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On May 18, 2017, the federal government published a paper that outlines the rules of the carbon pricing backstop that will be imposed upon any province/territory that does not have an adequate carbon pricing system in place by 2018. Currently, British Columbia, Alberta, Ontario, and Quebec have implemented their own carbon pricing regimes. The pan-Canadian pricing approach gives jurisdictions the flexibility to implement either of the following carbon pricing systems: an explicit carbon levy on fossil fuels, a cap-and-trade system, or a hybrid system that is a combination of the two. Greenhouse gas (“GHG”) emissions are to be measured on the basis of carbon-dioxide equivalents (“CO2e”).

For the purpose of the carbon levy, each type of fossil fuel is assigned a particular price unit of fuel consumed. The levies are phased in over 5 years from 2018 to 2020. Fuel distributors, importers, and users will be required to register with the CRA, file monthly returns, calculate the total amount payable for each jurisdiction, and remit that amount to the Receiver General. Emitters will also be required to provide information to the CRA that is used to determine the total levy payable. The information requirements with respect to registered fuel users will depend on the nature of their usage (e.g., aviation, energy generation, etc.). In some cases, emitters may be required to provide and maintain security with respect to their obligations. Moreover, the carbon levy will include compliance enforcement provisions such as interest, penalties, and offenses.

The second element of the framework is the output-based pricing, which is essentially a cap-and-trade system which will be administered by Environment and Climate Change Canada. Again, each backstop province may decide to implement the carbon tax, the output-based pricing, or a hybrid combination of the two regimes. Environment and Climate Change Canada will accept written comments on the technical paper until June 30, 2017.

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