Canadian Carbon Pricing Systems: 2025 Review
Commissioned by IISD, this Pembina Institute report examines five of Canada’s industrial carbon pricing systems. It compares design and implementation, key features, and market outcomes, such as credit oversupply and uncertainty. As Southeast Asia builds momentum on carbon pricing, Canada’s experience offers practical lessons for strengthening systems and addressing challenges.
Key Findings
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When designed and maintained well, industrial carbon pricing systems are a cost-effective way to drive large emissions reductions while protecting the competitiveness of industries.
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Canada’s mix of industrial carbon pricing systems has largely been effective. A common federal benchmark provides coherence, while provincial tailoring supports competitiveness. At the same time, design differences can fragment markets and blur carbon price signals.
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Maintaining a strong, predictable carbon price is essential to reduce emissions and support industrial decarbonization. Continuous monitoring and maintenance are needed to ensure effectiveness. Credit oversupply issues in Canada highlight the need for systems to strengthen predictably over time.
Canada’s province of Alberta implemented North America’s first industrial carbon pricing system in 2007. In 2025, large industrial emitters in every region of Canada are covered by either a regional carbon pricing system or the federal system. This report examines the histories and designs of five major Canadian carbon pricing systems: Alberta’s Technology Innovation and Emissions Reduction regulation, British Columbia’s Output-Based Pricing System, Ontario’s Emission Pricing System, Québec’s Cap-and-Trade, and the federal Output-Based Pricing System.
The report provides an overview of the industrial and emissions context for each system and outlines their approaches to benchmarking, compliance flexibility, stringency adjustments, and other key design parameters. It also reviews market outcomes, highlighting risks such as credit oversupply and uncertainty, and distills lessons learned from each system’s implementation.
This report is by Pembina Institute and was commissioned by the International Institute for Sustainable Development.
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