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Carbon Pricing Policies
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The Western Climate Initiative

In 2009, Ontario joined 10 other states and provinces - Washington, Oregon, California, Utah, New Mexico, Arizona, Montana, British Colombia, Manitoba and Quebec- in forming the Western Climate Initiative, whose aim is to reduce GHG emissions independently from the federal governments through a cap-and-trade system. WCI has no regulatory authority on its own, but instead, relies on WCI partners to adopt regulations based on WCI recommendations which would lay the foundation for a North American cap-and-trade program. California and Quebec’s cap-and-trade programs have been officially linked since January 2014. The provincial government of Ontario has also proposed to link their program with California and Quebec’s cap-and-trade program.


What is cap-and-trade?

A cap-and-trade system is a market mechanism that essentially takes, in this case CO2 eq, and transforms it into a marketable and tradable commodity just like any other. By placing a dollar value on CO2 eq emissions operators are inclined to search for potential reduction strategies as to avoid the economic burden associated with high emissions. As such, cap-and-trade systems are said to promote technological advancements and fast and effective reductions.

How will the cap-and trade system work?

  • A mandatory emissions cap is set.
  • Allowances/credits are allocated to operators. Credits can then be bought or sold between emitters.
  • Measurement and reporting. Each emitter must hold a number of credits equal to its tonnes of emissions for the compliance period.
  • Enforcement. In the case of the WCI if the facility does not have the appropriate number of credits a penalty of three allowances will be assessed for each one they are short.

Carbon Pricing Programs in Americas

On October 3, 2016, the Government of Canada announced a Pan-Canadian Pricing on Carbon Pollution which states that all Canadian provinces will have carbon pricing in place by 2018. Provinces can be flexible in deciding whether they want to implement a carbon tax or a cap-and-trade program. The price on carbon will start at a minimum $10 per tonne CO2 eq in 2018 and increase by $10 a year to reach a $50 per tonne CO2 eq by 2022.

O. Reg. 144/16: The Cap and Trade Program


Summary


Starting July 1, 2016, Ontario’s cap-and-trade regulation came into effect. The first compliance period will begin on January 1, 2017 with the intention to link its program with those of California and Quebec through the Western Climate Initiative (WCI).


Overall GHG reduction target


By 2020, reduce GHG emissions by 15% below 1990 levels

By 2030, reduce GHG emissions by 37% below 1990 levels



Sectors covered and thresholds



First compliance period (2017-2020):

Electricity, Industry, Distributors and importers of fuels, Distributors of natural gas

Threshold: >25,000 CO2e/year



Offsets and credits



Approved offset projects will be determined by end of fiscal year 2016

Quantitative limit: Up to 8% of each entity’s compliance obligation.

Offsets issued by jurisdictions linked with Québec  are also recognized

Québec Regulation Q-2, r46.1 Cap & Trade Regulation



Summary & Price



Québec's cap-and-trade system for greenhouse gas emissions allowances was introduced in 2012 with a transition year where emitters could familiarize themselves with the program and prepare without mandatory compliance. The program's enforceable compliance obligation began on January 1st 2013. Initially covering It currently covers about 85% of Québec's emissions. Québec has been a member of the Western Climate Initiative (WCI) since 2008 and formally linked its system with that of California on January 1st 2014.

Current Allowance Price (per t/CO2e): USD 12.73



Overall GHG reduction target



By 2020, reduce GHG emissions by 20% below 1990 levels

By 2030, reduce GHG emissions by 37.5% below 1990 levels



Sectors covered and thresholds



First compliance period (2013-2014):

Electricity, Industry

Threshold: >25,000 CO2e/year

Second (2015-2017) and third compliance period (2018-2020):

Electricity, Industry, Distributors and importers of fuels

Threshold: >25,000 CO2e/year



Offsets and credits



Quantitative limit: Up to 8% of each entity’s compliance obligation

Offsets issued by jurisdictions linked with Ontario are also recognized

Approved Protocols

Alberta Regulation 175/2016



Summary



Starting January 1, 2017, the Government of Alberta will impose a $20 per tCO2 carbon levy on fuels and will increase to $30 per tCO2e by 2018.



Overall GHG reduction target



Provincial target:

50Mt CO2e below “business as usual” by 2020

50% below projected “business as usual” and 14% below 2005 levels

Regulated emitters will be required to reduce emissions intensity below a baseline established using 2003-2005 averages for emissions and production or during the first 3 years of commercial operation for new facilities:

15% in 2016

20% in 2017



Sectors covered and thresholds




Alberta’s Carbon Tax is applied to fossil fuels burned for transportation and heating. The fossil fuels covered include:

· Gasoline

· Diesel

· Natural Gas

· Propane

The carbon levy rates for each of fuel is listed in the link below:

Carbon levy rates

B.C. Reg. 125/2008



Summary



In 2008, BC introduced a carbon tax on fossil fuels that was initially set at $10 per tCO2e and has increased each year to reach the final price of $50 per tCO2e by 2022. The tax applies to all fossil fuels and is collected at the point of retail consumption (e.g. at the pump or gasoline and diesel). The revenue raised by the tax is revenue neutral as the proceeds are matched by cuts in other taxes.



Overall GHG reduction target



By 2020, reduce GHG emissions by 33% below 2007 levels

By 2050, reduce GHG emissions by 80% below 2007 levels



Sectors covered



BC’s Carbon Tax is applied to fossil fuels burned for transportation, home heating, and electricity. The fossil fuels covered include:

· Gasoline

· Diesel (light fuel oil)

· Jet Fuel

· Natural Gas

· Propane

· Coal

United States

California Cap-and-Trade Program



Summary



California’s cap-and-trade program was initiated in 2012 by the California Air Resource Board (CARB) and entered enforceable compliance obligations on January 1, 2013 with the start of its first compliance period (2013-2014).

California has been a member of the Western Climate Initiative (WCI) since 2007 and formally linked its system with that of Quebec on January 1, 2014.

Current Allowance Price (per t/CO2e): USD 12.73



Overall GHG reduction target



By 2020, reduce GHG emissions to 20% below 1990 levels

By 2050, reduce GHG emissions to 80% below 1990 levels



Sectors covered and thresholds



First compliance period (2013-2014):

Electricity, Industry

Threshold: >25,000 CO2e/year

Second (2015-2017) and third compliance period (2018-2020):

Electricity, Industry, Distributors and importers of fuels

Threshold: >25,000 CO2e/year



Offsets and credits



Quantitative limit: Up to 8% of each entity’s compliance obligation

Approved Protocols

Regional Greenhouse Gas Initiative (RGGI)



Summary



RGGI was the first mandatory GHG emissions trading scheme in the United States. The program's first compliance period was from January 1st, 2009 through to December 31st 2011. It is now in its third compliance period (January 1st, 2015 –December 31st, 2017.

The jurisdictions currently included in RGGI are Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont.

Current Allowance Price (per t/CO2e): USD 2.10



Overall GHG reduction target



RGGI states have committed to reduce GHG emissions from the regulated power sector by more than 50% from 2005 levels by 2020.



Sectors covered and thresholds



Fossil Fuel Electric Generating Units  equal to or greater than 25MW



Offsets and credits




Approved protocols



Mexico

· In January 2014, Mexico introduced a carbon tax covering fossil fuel sales and imports by manufacturers, producers, and importers (natural gas exempted).

· In the longer run, Mexico is considering the transition to an ETS.

· Overall GHG reduction target: Mexico has committed to reduce GHG emissions 30% below BAU by 2020.

· Offset credits: Quantitative limit: 3% of an entity's liability may be covered with offsets through projects approved  by the Clean Development Mechanism (CDM)


Brazil

· The Brazilian government is currently assessing different carbon pricing instruments including an emissions trading scheme (ETS) and a carbon tax to meet Brazil's voluntary GHG reduction commitment. Brazil is expected to work on design options and conduct comprehensive economic and regulatory impact assessments for both instruments. Depending on the impact assessment, a decision is expected to be made by 2017.

· Overall GHG reduction target: In December of 2009, Brazil made a voluntary commitment to reduce GHG emissions by 36.1%-38.9% compared to BAU projections for 2020.

Chile

· In 2014, the Chilean parliament approved a carbon tax of US$5/tCO2e to start in 2018 and cover power facilities with capacity above 50 megawatts. The tax will cover 55% of the country’s carbon emissions. Chile has voluntarily committed to reduce its GHG emissions 20% by 2020 based on 2007 levels.

· Overall GHG reduction target: Chile has voluntarily committed to reduce its GHG emissions 20% by 2020 based on 2007 levels.


Costa Rica

· In 1997, Costa Rica approved a carbon tax which is set at 3.5% of the market value of fossil fuels. The revenue that is generated from the tax goes towards the Payment for Environmental Services (PSA) program, which gives incentives and rebates to property owners to invest in sustainable development and forest conservation.

Last Updated on Tuesday, 28 February 2017 14:29