Seen as one of the most effective ways to reduce climate-damaging greenhouse gas (GHG) emissions and drive clean-tech investment, carbon pricing policies are being employed by governments around the globe...

1. Canada targets GHGs
with new carbon policies
Federal carbon pricing benchmark
Under this program, the provinces and
territories will have flexibility to decide
whether they want to employ a direct,
price-based system to address carbon
pollution or a cap-and-trade program.
For direct price-based systems (e.g., British
Columbia’s carbon tax), provinces or
territories will have to cost CO2 at a
minimum of $10 per tonne by 2018 and
raise it by $10 a year to reach $50 per tonne
by 2022. Those using a cap-and-trade
system (such as Ontario and Quebec) will
be required to annually reduce the number
Canada’s fight against climate change
In 2016, the Government of Canada
announced the Pan-Canadian Framework
on Clean Growth and Climate Change,
designed to reduce GHG emissions while
ensuring economic growth. One of the main
pillars of the framework is the implementation
of carbon pricing. To further advance the
initiative, a corresponding carbon pricing
system was announced in May 2017,
providing the necessary mechanism to
effectively address climate change and
support clean-tech innovation.
Seen as one of the most effective ways to reduce climate-damaging greenhouse gas (GHG) emissions and drive
clean-tech investment, carbon pricing policies are being employed by governments around the globe. The goal
is to shift the burden to entities responsible for producing GHG while simultaneously increasing investment into
GHG reduction technologies. Forty countries have implemented some form of carbon pricing mechanisms to
reduce emissions while many others are looking to follow suit in the coming years.1
“ This will reduce pollution,
create incentives for companies
to innovate and develop clean
solutions, and provide certainty
to businesses that we are moving
to a clean-growth economy."
- Catherine McKenna, Minister of Environment and
Climate Change on carbon pricing system

2. Audit • Tax • Advisory
www.GrantThornton.ca
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of GHG permits by both cutting emissions
through 2022 and achieving a 2030 emissions
target equal to or greater than Canada’s
target (a 30 percent reduction).
So far, Alberta, British Columbia, Ontario
and Quebec, which represent over 80
percent of the Canadian population, have
introduced such programs, while other
provinces are working towards one.
2
The federal government will provide
a pricing system—a carbon pricing
backstop—for provinces and territories
that haven’t adopted one of the two
systems by 2018.
The carbon levy
A key part of the carbon pricing backstop
will be a carbon pricing levy. The following
fossil fuels will be subjected to this levy
whether the fuel was produced in, or
brought into the jurisdiction:
• Liquid fuels (e.g., aviation fuel,
gasoline, diesel)
• Gaseous fuels (e.g., natural gas)
• Solid fuels (e.g., coal and coke)
Fuel use will be defined to include fuel
that is combusted, vented or flared. The
goal is to levy the fuel early in the supply
chain, so the final user will be purchasing
levy-paid fuel.
Application of the carbon levy
The fuel supply chain will be divided into four user categories to which the levy may be applied:
* These users will be required to register with the CRA and will file monthly returns with them.The required
persons will need to calculate the amount of levy payable in the return for each backstop jurisdiction and
remit the appropriate amount to the Receiver General of Canada. These amounts will have to be paid by
end of the first month following the fiscal month. Failure to comply with the carbon levy can lead to interest
on outstanding amounts, penalties and offences.
Levy exceptions
The government will provide relief (e.g., rebates) from the levy in certain
situations, including:
• fuel used as raw material, solvent or diluent in a process that does not produce heat or energy;
• gasoline and diesel fuel used by registered farms in certain activities;
• fuels exported from backstop jurisdictions;
• the biofuel portion of blended fuels; and
• fuel used at a facility whose emissions are accounted for under the direct-based
pricing system.
Next steps
The Pan-Canadian Framework will review program outcomes in 2022 and make suitable
changes to ensure it reaches its full potential. The review will address program consistency,
design and implementation with respect to reducing GHG emissions while stimulating
market innovation, economic growth and the development of clean technology.
To learn more about Canada’s new carbon pricing model, and how Grant Thornton LLP
can help your organization, please contact:
Martha Oner
National Leader, R&D and Government Incentives
T +1 519 744 2333
Martha.Oner@ca.gt.com
1 http://www.worldbank.org/en/programs/pricing-carbon
2 Technical Paper on the Federal Carbon Pricing Backstop - http://www.fin.gc.ca/activty/consult/fcpb-fsftc-eng.pdf
Registered
fuel distributors*
producers of fuel, large wholesale distributors of fuel, and natural
gas retailers
Registered
fuel importers*
importers of fuel from outside Canada or that bring fuel into
a backstop juristiction from another jurisdiction in Canada
Registered
fuel users*
inter-jurisdictional commercial transportation operators, and entities
operating a facility covered by the output based pricing system
Non-registered
Retailers (other than natural gas retailers) and end users,
including individuals and business consumers