The Pan-Canadian Framework on Clean Growth and Climate Change is Canada’s plan to grow the economy while reducing greenhouse gas (GHG) emissions. A central component of this frame work is the commitment to pricing carbon pollution across the country by 2018. In October 2016, the federal government published a benchmark for ensuring that carbon pricing applies to a broad set of emission sources throughout Canada by 2018 with increasing stringency over time. This benchmark provides provinces and territories with flexibility to implement their own carbon pollution pricing systems. In the benchmark, the federal government also committed to implement a federal carbon pricing backstop system that will apply in any province or territory that does not have a carbon pricing system in place by 2018 that aligns with the benchmark.

The federal government plans to introduce new legislation and regulations to implement a carbon pollution pricing system – the backstop – to be applied in jurisdictions that do not have carbon pricing systems that align with the benchmark. The federal carbon pollution pricing backstop will be composed of two key elements:

  • a carbon levy applied to fossil fuels
  • an output-based pricing system for industrial facilities that emit above a certain threshold, with an opt-in capability for smaller facilities with emissions below the threshold

Both the carbon levy and the output-based pricing system will price carbon on a CO2e basis.