By Dale Beugin, Anna Kanduth, Dave Sawyer, and Rick Smith
Debate about Canada’s climate policies has often been disconnected from their actual emissions impact. In part, this has been because of the lack of comprehensive analysis that breaks down emissions impacts policy-by-policy.
A new report is the first rigorous analysis attributing emissions reductions to collective and individual climate policies in Canada. The report, Which Canadian climate policies will have the biggest impact by 2030?, shows that large-emitter trading systems—also known as industrial carbon pricing—will do more than any other policy to cut Canada’s carbon pollution.
The report is part of the Canadian Climate Institute’s 440 Megatonnes project, which includes modelling from Navius Research, detailing the impact of major climate policies on Canada’s future emissions trajectory. It shows that large-emitter trading systems will be the single biggest driver of emissions reductions to 2030. These systems will deliver up to half of total emissions cuts expected from Canada’s Emissions Reduction Plan between now and 2030.
We also find that climate policies already in place are expected to deliver big carbon cuts—preventing 226 Mt of emissions by 2030. That’s roughly the same as the annual emissions profiles of Ontario and Quebec combined. Some policies reduce emissions more than others—but they all add up. Any weakening or backtracking on individual policies would require new or stronger measures to fill the emissions gap.
There are different ways to assess the impact of climate policies on Canada’s emissions. In this Insight, we tackle the question from two angles. First, we explore how existing climate policies, including federal, provincial, and territorial carbon pricing systems, are already reshaping Canada’s emissions trajectory. Second, we look at the impact of major climate policies between 2025 and 2030 to identify what’s at stake in government decisions moving forward.
Climate policies are working, with industrial carbon pricing leading the pack
There’s no question that existing (“legislated”) policies are working, while those under development have the potential to do much more. Our recent independent assessment of the federal government’s 2030 Emissions Reduction Plan Progress Report also looked at what would happen if Canada hadn’t implemented any emissions-reducing policies. In this “no climate policy” scenario, emissions would be higher today and rising steadily—reaching 765 megatonnes (Mt) in 2025 and 775 Mt in 2030, or 23 and 41 per cent higher than projected emissions under our legislated policy scenario, respectively.
This means that policies currently in place—from carbon pricing to the vehicle efficiency standards to support for heat pumps—prevent 226 million tonnes (Mt) of carbon emissions in 2030. That’s equivalent to the current emissions profiles of Quebec and Ontario combined.
In addition, every tonne of emissions reduced lowers long-term climate impacts and damages. The impacts of climate change are driving up the cost of living for Canadians and are a drag on the Canadian economy.
Of these 226 Mt of avoided emissions, our analysis estimates that federal, provincial, and territorial carbon pricing systems play a leading role. Carbon pricing consists of two distinct types of policies.
The first policy is the fuel charge paid by most households and small businesses (often referred to as the “carbon tax”—and accompanied by quarterly rebates). The fuel charge contributes between 8 and 9 per cent (or 19 to 22 Mt).
The second policy focuses on reducing industrial carbon emissions by establishing large-emitter trading systems (LETS). This approach varies by region and includes output-based pricing (such as Alberta’s TIER system), or Ontario’s emissions performance standard. By 2030, these large-emitter trading systems contribute between 23 and 39 per cent (or 53 to 90 Mt) of avoided emissions relative to the no-climate policy baseline. Large-emitter trading systems play a larger role in emissions reductions compared to the fuel charge, in part because they cover a higher share of Canada’s emissions.
Implications of policy decisions moving forward
Determining the impact of climate policies implemented to date is one thing. But to understand what’s at stake in the policy choices happening today and going forward, we also worked with Navius Research to estimate the impact of major federal climate policies in the Emissions Reductions Plan between 2025 and 2030. These policies include:
- Large emitting trader systems
- Fuel charge
- Oil and gas emissions cap
- 75 per cent methane regulation
- Waste methane capture
- Clean Fuel Regulations
- Investment tax credits
- Zero emission vehicle standards
Since policies inherently exist as a package—working together, overlapping, and interacting—isolating a single number of emissions reductions for each policy is challenging. We therefore assessed the impact that each of the analyzed policies could have under two extremes. In the first, the policy is added to a baseline scenario, which does not include the legislated policies we assessed after 2025, namely the large-emitter trading systems, the fuel charge, the clean fuel regulations, and the investment tax credits . This scenario isolates the impacts of the policy without interactions with other ERP policies. In the second, the policy is added to a scenario that includes all other ERP policies. This scenario isolates the impacts of the policy including interactions between ERP policies.
Critically, backtracking on policies that are making an impact or failing to implement planned policies without credible alternatives will set back Canada’s emissions reduction progress. Most importantly, real, sustained momentum requires regular in-depth analysis on policy implementation and impact, with transparent reporting on the government’s progress.
Find out more by reading the full insight by the Canadian Climate Institute here.
Written by Dale Beugin, Anna Kanduth, Dave Sawyer, and Rick Smith are with the Canadian Climate Institute.
Featured images credit: Getty Images
