Canada Carbon Credit : Canada Implements Carbon Credit Trading Program

 




Canada has implemented an economy-wide carbon pricing plan to help meet its Paris Agreement targets and transition to a low-carbon economy. The core element of the plan is a federal carbon pricing 'backstop' system that puts a price on greenhouse gas emissions. This system operates through a carbon tax in some provinces and a cap-and-trade emissions trading system in others.


The carbon tax applies to fossil fuels used in buildings and transportation. It started at $20 per tonne of CO2 emissions in 2019 and will increase by $10 each year until it reaches $50 per tonne in 2022. For , large industrial facilities will be part of the output-based carbon pricing system. Under this system, industrial facilities will pay carbon credit prices on a portion of their emissions.


The cap-and-trade system sets a declining limit (or cap) on total emissions from covered facilities. It issues emissions allowances equal to the cap, which covered facilities can trade amongst themselves. Facilities that emit less than their allowance can sell excess allowances to others that need them to comply. This flexibility allows the  to find the lowest cost pathways to reducing emissions.


Eligible Emission Sources And Canada Carbon Credit  


Certain emission sources and facilities are covered under Canada's carbon pricing plan. For the carbon tax, this includes gasoline, diesel, natural gas, propane and heating oil used in buildings and transportation.


For the cap-and-trade system, facilities covered are generally those that emit over 10,000 tonnes of CO2e annually. This includes electricity generation, mining, pulp and paper mills, petroleum refineries and manufacturing facilities. Agriculture, waste and smaller industrial facilities emit below the threshold. Transportation and buildings are covered under carbon taxes rather than cap-and-trade.


Establishing A Carbon Credit Trading


Once the carbon price is in effect, covered facilities need to either reduce their emissions, purchase allowances from others with excess allowances, or pay the carbon price. This establishes supply and demand dynamics that allow for carbon credit trading.


The federal government acts as the central authority overseeing the carbon s. It sets the emissions caps, issues allowances, monitors compliance and enforces penalties. A public tracking system is used to record allowance holdings and trades.


Facilities can trade allowances on the secondary  through private brokers or at auctions hosted by the government. Allowance prices are determined by  supply and demand. Facilities seeking the lowest costs will purchase from others who abated below their allocated limit. Over time, as caps decline, prices should rise as lower-cost options are exhausted.


Proceeds And Revenue Recycling


Revenue collected from carbon pricing stays in the province it is generated. Provinces collect carbon tax proceeds and the federal government collects auction allowance proceeds for the cap-and-trade system. The majority of revenues are recycled back to residents through tax cuts and rebates.


Studies show a majority of families will get more back than they pay in carbon costs due to the recycling. Low and middle-income families especially benefit as they pay a smaller percentage of income on emissions-intensive goods and receive higher rebates. This mitigates potential regressive impacts of the carbon price.

 

Revenue is also used to fund other programs supporting the transition like incentive programs for green technologies and infrastructure. Collectively, carbon pricing aims to change emissions without economic harm by incentivizing reductions through  signals while offsetting costs to consumers  .


Impact On Emissions And The Economy


While still early, analysis suggests carbon pricing is influencing decisions and reducing emissions as intended. A federal review found emissions fell between 2005 and 2016 in provinces with existing carbon pricing compared to those without. Most economists also agree moderate carbon prices like Canada's can reduce emissions at relatively low economic cost.


The studies from the National Bank of Canada, International Monetary Fund and others project Canada's plan will lead to substantial emission cuts from fuel switching and technology adoption while modestly impacting GDP. By changing the relative prices of goods and services, it aims to transition production and consumption to cleaner options over the coming decades. If successful, Canada's plan offers a model for implementing -based carbon pricing policy on a broad scale.

*Note:
1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it

 

Get more insights on this topic:https://www.newsanalyticspro.com/canada-carbon-credit-understanding-carbon-credits-in-canada-in-global/

 

Author Bio:

Money Singh is a seasoned content writer with over four years of experience in the market research sector. Her expertise spans various industries, including food and beverages, biotechnology, chemical and materials, defense and aerospace, consumer goods, etc. (https://www.linkedin.com/in/money-singh-590844163 )



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