Canada: 2030 Federal GHG Emissions Reduction Plan & Funding Commitments

Introduction

On March 29, 2022, the federal government issued the first carbon Emissions Reduction Plan (2030 Plan)¹ under the Canadian Net-Zero Emissions Accountability Act. ²

The 2030 Plan notes that "at current rates, global warming of 1.5 °C will likely be reached between 2030 and 2052, and it is only with "urgent, deep reductions in greenhouse gas (GHG) emissions" that global warming can be limited to below 2 °C. The effects of climate change will be acutely felt in Canada as it is warming at twice the global average, with the North warming three times as fast.

In the Minister's Forward to the 2030 Plan, the Honourable Steven Guilbeault succinctly sets out the purpose and goal of the 2030 Plan:

"The science is clear. Reducing carbon pollution to net-zero by 2050 is our best chance of keeping the planet livable for our children and grandchildren. Achieving net-zero means we need to reduce emissions to the point that the carbon emissions that we do produce can be negated through measures like tree planting or carbon capture technologies...This is our ambitious and achievable roadmap to reach our emissions reduction targets under the Paris Agreement."

The 2030 Plan charts a broad path for Canada to reduce emissions to 40% – 45% below 2005 levels by 2030. The federal government has earmarked $9.1 billion in new investments embedded in 22 programs and funds. There are also binding economy-wide measures such as carbon pricing and clean fuel regulations as well as targeted incentives on a sector by sector basis.

The measures and policies under the 2030 Plan are not simply to ward off the worst effects of climate change. It is expected that by meeting Canada's 2030 and 2050 climate objectives, good middle-class jobs will be created and a "competitive, sustainable and inclusive" economy will grow. The 2030 Plan notes that by 2025, clean tech's contribution to Canada's GDP is expected to grow to $80 billion from $26 billion in 2016.

The 2030 Plan also provides some general encouragement stating that Canada's investments of over $100 billion thus far and the introduction of over 100 measures in support of climate-related commitments are "bending the emissions curve" in the right direction.

The following measures and policy signals set out in the 2030 Plan are intended to build on and enhance the progress made to date.

On April 7, 2022, the Honourable Chrystia Freeland, Deputy Prime Minister of Canada and Minister of Finance, delivered the Liberal Party's federal budget (Budget 2022),³ which accounts for the $9.1 billion in climate-related funding outlined in the 2030 Plan.

Putting a Price on Carbon Pollution

The 2030 Plan notes that carbon pricing is the "cornerstone" of Canada's approach to climate action. The pricing system has two parts: (i) a regulatory charge on fossil fuels such as gasoline; and (ii) a performance-based emissions trading system for industries, known as the Output-Based Pricing System (OBPS). The federal carbon pollution pricing system returns all direct proceeds back to the jurisdiction where they were collected.

The price on carbon pollution started at $20 per tonne of emissions in 2019 and is slated to increase at $10 per tonne per year until it reaches $50 per tonne in 2022. In 2023, the price will start rising $15 per year until it reaches $170 per tonne in 2030.

Starting this year, the federal government will return the proceeds collected through the fuel charge to families on a quarterly basis. In addition, the government will provide targeted support to Indigenous Peoples, farmers, and small and medium-sized businesses in recognition of their unique circumstances.

The funds collected under the OBPS will be used through the Decarbonization Incentive Program to support clean technology projects that further reduce GHG emissions. The funds will also support the Future Electricity Fund designed to support the production and delivery of clean electricity.

The federal government will also develop and implement a GHG Offset System under the Greenhouse Gas Pollution Pricing Act. ⁴ The GHG Offset System is intended to encourage voluntary project activities to reduce or remove GHG emissions thus creating offset credits. Facilities under the federal OBPS will be able use federal offset credits as a compliance option.

Production and Use of Clean Fuels

The federal government has published proposed Clean Fuel Regulations⁵ aimed at decarbonizing the transportation sector. They will require liquid fossil fuel (gasoline and diesel) suppliers to reduce the carbon intensity of the fuels they produce and import for use in Canada. The goal of the Regulations is to reduce the carbon intensity of fuels by 15% (below 2016 levels) by 2030.

The federal government will also explore the feasibility of a bioenergy strategy to optimize how Canada uses its agricultural, forestry and municipal waste resources to generate net-zero energy in the medium and long term.

Supporting the Transition to a Clean Growth Economy

Several funds (Low Carbon Economy Fund, Challenge Fund and the Climate Action and Awareness Fund) have been created to support businesses, governments, not-for-profits, and Indigenous communities and organizations in the adoption of new technologies and programs aimed at reducing carbon emissions. The 2030 Plan and the Budget 2022 provide for the expansion of the Low Carbon Economy Fund through a $2.2 billion recapitalization.

Under the Budget 2022, the federal government proposes to expand eligible zero-emission technology manufacturing or processing activities through reduced corporate income tax rates. In addition, Budget 2022 proposes to introduce a 30% Critical Mineral Exploration Tax Credit (CMETC) to enhance exploration activities for minerals necessary for ramping up clean technology.

Footnotes

1 Canada, 2030 Emission Reduction Plan: Canada's Next Steps for Clean Air and a Strong Economy, available at https://perma.cc/WW4C-ZSJ2.

2 Canadian Net-Zero Emissions Accountability Act, S.C. 2021, c. 22.

3 Canada, A Plan to Grow Our Economy and Make Life More Affordable. Available at https://budget.gc.ca/2022/home-accueil-en.html.

4 Greenhouse Gas Pollution Pricing Act, S.C. 2018, c. 12, s. 186.

5 Canada Gazette, Part I, Volume 154, Number 51: Clean Fuel Regulations. Available at https://gazette.gc.ca/rp-pr/p1/2020/2020-12-19/html/reg2-eng.html.

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