Supplemental benchmark guidance

Pricing of carbon pollution is central to the Pan-Canadian Framework on Clean Growth and Climate Change (the PCF). Carbon pricing is an effective, transparent and efficient way to reduce GHG emissions at lowest cost to consumers and business and to support innovation and clean growth.

The Government of Canada published the Pan-Canadian Approach to Pricing Carbon Pollution (the Benchmark) on October 3, 2016. That document outlines the principles on which the pan-Canadian approach to pricing carbon pollution is based, and states that a federal carbon pollution pricing backstop will begin to apply in all jurisdictions that do not have a carbon pollution pricing system in place that meets the elements of the Benchmark by 2018. In August 2017, the Government published Guidance on the pan-Canadian carbon pollution pricing benchmark.

This document supplements those two documents, and provides further guidance on the carbon pollution pricing Benchmark to support governments’ efforts to have carbon pollution pricing in place throughout Canada in 2018.

Additional guidance to the section in the Benchmark on “Legislated increases in stringency” regarding incremental reduction requirement (applies both to explicit price-based systems and to cap-and-trade systems)

• Carbon pricing systems should be designed to achieve incremental GHG emissions reductions in the 2018 to 2022 period through a clear price signal flowing from the level at which caps are set or an explicit carbon price, meaning fewer emissions than would have occurred without the pricing system in place.

Additional guidance to the section in the Benchmark on “Legislated increases in stringency” for cap-and-trade systems^{Footnote 1}

• A reserve should be established from which emission allowances can be released to moderate sudden pressures in the market that could significantly and rapidly change prices to capped participants, including new entrants.^{Footnote 2} 
• The system should include other measures to support price predictability and market stability, including auction floor prices that increase consistently.^{Footnote 3} 
• Allowances should be distributed and reported in a transparent manner while protecting confidential business information, including methodologies for allowance allocation and quantities of free allowance provided.
• Clear rules should define the treatment of allowances and credits held by any capped facilities that cease operation.
• There should be clear rules and limits to prevent market manipulation.

Additional guidance to the section in the Benchmark on “Reporting” (applies both to explicit price-based systems and to cap-and-trade systems)

Jurisdictions should require, at minimum, annual reporting of emissions by regulated entities.

Jurisdictions with emissions trading should establish registries for tracking tradable units (allowances and credits), and should report periodically on market holdings and activities.