Charting the Course
How Canada's industrial carbon price can drive investment and emissions reductions beyond 2030
This report assesses three trajectories for Canada's industrial carbon price between 2030 and 2040. It finds that a high-price scenario achieves significant emissions reductions and drives investment in low-carbon technologies while the economy continues to grow. These findings confirm that industrial carbon pricing is a highly efficient climate policy; however, a strong set of complementary policies will be needed to achieve net-zero emissions by 2050.
Key Findings
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A strong and rising industrial carbon price drives new investment in clean projects and achieves significant emissions reductions with minimal economic impacts.
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Tightening performance standards relatively more quickly in sectors that are less exposed to international competition—such as oil and gas production—maintains strong emissions reductions while delivering better economic outcomes in terms of jobs, GDP, and net exports.
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While a strong and rising industrial carbon price triggers meaningful emissions reductions with minimal impacts on economic growth, achieving net-zero emissions by 2050 will be possible only if robust complementary climate policies are also in place.
Industrial carbon pricing is a highly efficient policy and could be Canada’s most important tool to drive industrial decarbonization. This report presents our analysis of three carbon price trajectories between 2030 and 2040, to understand their environmental and economic effects, which should, in turn, inform policy design. The three trajectories, modelled by Navius Research Inc., are as follows:
- flat price: The effective carbon price—defined as the price that industrial facilities pay for carbon credits in secondary markets—reaches CAD 130/t CO2e in 2030 and remains constant to 2040.
- low price: The effective carbon price reaches CAD 130/t CO2e in 2030 and rises linearly to CAD 230/t CO2e in 2040.
- high price: The effective carbon price reaches CAD 130/t CO2e in 2030 and rises linearly to CAD 380/t CO2e in 2040.
The report concludes that Canada’s industrial carbon price is well-positioned to lead Canada’s emissions reductions for years to come, but reaching the country’s climate goals will require the price to be significantly strengthened. A more ambitious trajectory beyond 2030, rapid and differentiated tightening rates for performance standards, and complementary policies will be essential to maximize emissions reductions while managing a smooth transition to a cleaner economy.
Participating experts
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