Here are some highlights from the plan:<\/p>\n
The status quo:<\/p>\n
Alberta has had an industrial carbon pricing regime for almost two decades. Under its Technology Innovation and Emissions Reduction policy, each facility that emits more than 100,000 tonnes of carbon dioxide a year is subject to a certain performance benchmark.<\/p>\n
Facilities that fall under the limit can generate and sell credits. Those that exceed their limit can comply by buying credits, investing in on-site carbon reducing technology or paying into a provincial technology fund.<\/p>\n
Federal and provincial officials agree the program hasn\u2019t been working. Though the \u201cheadline\u201d price for the amount paid to government is set at $95 a tonne, it\u2019s rarely the cost polluters bear in real life. That\u2019s because there is a surplus of credits in the marketplace, which acts like any other based on supply and demand.<\/p>\n
The ready supply has pushed down what\u2019s known as the \u201ceffective\u201d price to less than half the headline price. In that scenario, companies aren\u2019t compelled to reduce their emissions because it\u2019s so much cheaper to offset them with cheap-as-dirt credits.<\/p>\n
What\u2019s changing: <\/p>\n
Both governments have agreed to target an effective carbon price of $130 by 2040. That is to be done by both gradually raising the headline price from its current level and setting a floor price for carbon credits, with the effective price falling within that range.<\/p>\n
\u201cThis gives industry the time and certainty needed to plan, invest and deliver real emissions-reducing projects without undermining competitiveness,\u201d Smith said before she signed the agreement alongside Carney.<\/p>\n
The Alberta government estimates that by having its own carbon pricing regime instead of having to comply with the federal one, industry will save about $250 billion through 2050. The federal backstop would have required a carbon price of $170 per tonne by 2030.<\/p>\n
An insurance policy, of sorts: <\/p>\n
The agreement seeks to provide long-term investment certainty for those pursuing green projects. Both companies have agreed to issue \u201ccarbon contracts for difference\u201d to those pursuing emissions reductions investments between 2030 and 2040. If the federal carbon policy is repealed, for instance, Ottawa would be on the hook for the difference in the carbon price. The same would go for Alberta if it gets rid of TIER.<\/p>\n
Both governments have agreed to jointly fund contracts covering up to 75 million tonnes of emissions reductions up to a maximum liability of $600 million each.<\/p>\n
\u201cIn other words, we will have skin in the game so that that market actually works,\u201d Carney said at the signing event.<\/p>\n
\t\tKeep it Factual<\/p>\n
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