Ministers’ letter to provinces and territories on next steps in pricing carbon pollution

Dear Ministers:

As you know, a central component of the Pan-Canadian Framework on Clean Growth and Climate Change is the commitment to pricing carbon pollution across the country in 2018. This was reaffirmed at the meeting of Canada’s Finance Ministers held in Ottawa on Monday, December 11, 2017.

Thanks to leadership from jurisdictions across Canada and around the world, we know that a price on pollution is one of the most efficient tools we have to drive clean innovation and curb greenhouse gas emissions. That’s why our government set a carbon pricing standard, or benchmark, that all jurisdictions must meet.

The October 2016 Pan-Canadian Approach to Pricing Carbon Pollution recognizes local realities, providing provinces and territories the flexibility to design their own carbon pricing systems, including either an explicit price-based system or a cap-and-trade. We also continue to work with the territories specifically to address their unique circumstances, including high costs of living, challenges with food security, and emerging economies.

You will remember that the pan-Canadian carbon pricing approach commits the federal government to implement a backstop to ensure progress on this national challenge. The backstop can apply in jurisdictions that request it, or in those that do not have a carbon pricing system in place that meets the standard in 2018. It will also supplement systems that do not fully meet the benchmark outlined in the Pan-Canadian Approach to Pricing Carbon Pollution. In May 2017, we released a technical discussion paper for comment on how the proposed federal backstop would work.

As we collectively make progress towards our goals, we are writing today to outline the next steps in the federal government’s process, which are as follows:

• In early January 2018, we will release draft legislative proposals for the federal backstop. We hope you will take the opportunity to review the draft and provide comments.
• Any province or territory that chooses the federal backstop, in whole or in part, should confirm this via written reply to this letter by March 30, 2018. This would allow us to implement the federal backstop in those jurisdictions in fall 2018.
• By September 1, 2018, for those opting to establish or maintain a provincial or territorial carbon pricing system that meets the benchmark, we ask that you outline how your province or territory is implementing carbon pricing. Based on the information provided, as well as follow-up information as needed, we will work with you to confirm whether your carbon pricing system meets the benchmark.
• After reviewing each system, the Government of Canada intends to implement the federal backstop in whole or in part on January 1, 2019 in any province and territory that does not have a carbon pricing system that meets the benchmark.
• In order to minimize uncertainty for residents, businesses and investors, once the backstop goes into effect in a jurisdiction, we intend to keep it in effect until at least 2022.
• From 2019 onwards, there will be an annual verification process to ensure carbon pricing systems continue to meet the benchmark. We will also monitor major changes to provincial and territorial systems on an ongoing basis.

We look forward to working in partnership with each of you to implement our commitments to clean growth and climate action in Canada. Guidance documents outlining the federal benchmark are available, and federal officials would be pleased to assist with any questions you may have about this timeline, or about our approach to carbon pricing.

Sincerely,

The Honourable Catherine McKenna, P.C., M.P.
Minister of Environment and Climate Change

The Honourable Bill Morneau, P.C., M.P.
Minister of Finance