Previously we discussed the global market of carbon offsets and various regulatory measures governments impose to limit emissions from businesses in polluting industries. Today, we take a closer look at the Canadian landscape of carbon tax and offsets.

Overall, Canada has made significant efforts to fight climate change, despite its rather low population, with a goal of reducing emissions by 40% compared to the levels of 2005 by 2030 and net-zero by 2050 (Canada.ca). Low and non-emitting energy sources account for 82% of the country’s energy production, with plans to increase it to 95% by 2050, the closure of coal-firing energy plants being shut down by 2030 (CER).

1. Self-Imposed Carbon Tax to Reduce Emissions

The government is also following suit with world trends of carbon taxation. By the end of 2018, the government has obligated all provinces and territories to put a price on carbon emissions. It has since then introduced a federal backstop, which acts as a minimum for provinces that decide not to have their own provincial system. The price of a ton of carbon emissions is set to reach $170 by 2030, gradually increasing each year (note that all prices in this article are in Canadian Dollars). The system in place, the output-based pricing system that is present in most provinces, allows companies to store, sell, and buy credits if the company goes over or under the limits set for the specific industry. Canada also imposes a fuel charge which businesses pay as a separate line on natural gas bills, such as HST (Canada.ca).

2. Centralized Offset Registry for Carbon Offset Projects

Furthermore, Canada also offers several offsets that can be used towards meeting the regulatory standards and that can be traded through the Quebec cap-and-trade system, which is the only one to be connected to an international market through linkage with the California ETS. Currently, the government has a centralized offset registry that is only offering 2 protocols currently, with 4 additional ones in review. However, it received little interest as of its implementation in February 2023. Only 1 project has applied to become registered under it within 2 months after its introduction. This is partly due to the repetitiveness of the protocols offered with the other provincial offset registries. Only 3 provinces have set mentioned registries: Quebec, Alberta, and British Columbia. Alberta is predominantly the largest one in all aspects - the number of protocols offered, the number of projects, and the emissions that the projects have reduced.

Interesting to point out that, similarly to the voluntary global market, forestry projects dominate the amount of emission reduction, and only the Great Bear forest projects generated the largest number of carbon credits.

Despite Canada’s strive to become a leader in a green world, the system has its downsides and is vastly underdeveloped compared to Europe and its neighbours in the South – USA. Canada is currently on the path to carbon tax, whereas Europe uses a cap and trade system, which is proven to be better for achieving environmental goals (C2ES). Only two Canadian provinces have the cap-and-trade system in place, and one of them is set to be replaced by a taxation system by the end of this year. The current tax system in place only began to operate in 2018 and hence doesn’t have a significant historical database to analyze and assess performance yet. The same stands for offset registries based in the provinces and the federal registry, which is also not performing at par, as mentioned above. Furthermore, the connection to the international carbon market is limited, to say the least.

In conclusion, much further work must be done for Canada to step on the correct path for the most effective way to utilize its green efforts. While such work is being done, GreenEco Investments is implementing numerous projects that will support the Canadian green movement. The 37-billion-dollar renewable energy industry shows Canada is prepared for the transition, and we aim to be at the forefront of the change. We will provide our expertise in the green field to advance the development of a net-zero economy.