If Canada is to lower its carbon footprint, experts will tell you that industrial carbon pricing is the only way to go. The nation is taking urgent, bold steps to address the climate crisis head on. Yet this policy remains a foundational element for making deep emission reductions possible. For industrial carbon pricing, that value is just $30 per tonne today. This pricing is projected to achieve a third of Canada’s emissions reductions over the next five years. This strategy helps achieve the goal of reducing greenhouse gases and other emissions. It aims to increase industrial competitiveness and attract sustained domestic and foreign investment into low-carbon industries.
As pointed out by the Canadian Climate Institute, that economic cost of this policy is pretty negligible. They downplay the costs to less than “the price of a Timbit per barrel for oil.” While this improvement is promising in theory, the practically inevitable challenges that will arise around pricing transparency and compliance status loom large. Despite this, an overwhelming majority of experts support it as the best way to make sure taxpayers’ dollars are used as efficiently as possible to achieve environmental goals.
The Effectiveness of Industrial Carbon Pricing
According to a recent survey, 12 out of 14 experts concluded that pricing industry’s pollution has been the most successful method for curbing Canada’s carbon emissions. That is indeed an overwhelming consensus, and it really highlights the understood fact that industrial carbon pricing is a key element in Canada’s climate arsenal.
Werner Antweiler, an energy economist at the University of British Columbia, was blunt about what’s needed. He added, “This is far and away the most cost-effective means of achieving a necessary increase in emissions reductions. This sentiment speaks to a much deeper realization that the best ways to solve our environment challenges are often market-driven solutions.
Erik Haites, an economist with Margaree Consultants Inc., is on board with this perspective. To which he firmly replies, “They do. The Canadian system definitely could work better.” His remarks underscore the need for more efficiency to be wrung out of the status quo carbon pricing paradigm.
Attracting Investment and Driving Innovation
Industrial carbon pricing has been a very successful tactic for bringing investment into Canada. The policy has moved forward more than $57 billion of completed or underway projects that expect to eventually use carbon credits. This flood of investment is driving innovation—which attracts more investment—and that’s laying the groundwork for new low-carbon industries. These sectors are destined to become the main engines of our economic growth in upcoming decades.
Dave Sawyer, principal economist with the Canadian Climate Institute, reinforced the idea of governments creating a broader environment for investment. He uniquely underscored the need to create an environment that attracts and welcomes investment into Canada. “Develop the climate that will allow new, low-carbon industries to blossom,” he added, “for they will be the engines of tomorrow’s economy.”
Moreover, the policy has managed to reduce emissions while increasing industrial competitiveness. By matching economic incentives with environmental aims, a price on industrial carbon provides a win-win for inclusive prosperity. Sawyer elaborated on this by remarking, “It doesn’t require public dollars. It’s all about sending a signal to private dollars that low carbon is valuable and should be valuable.”
Challenges and Future Prospects
Despite its successes, industrial carbon pricing has shortcomings. In addition, experts have highlighted serious transparency problems related to both disclosure of compliance status and opaque pricing structures. These problems have the potential to erode public trust in the system and prevent it from being a useful balm.
Secondly, as global markets change, Canada needs to ensure that its pricing mechanisms are attractive enough that we do not lose our competitiveness. And the European Union is showing leadership on this front through the development of carbon border adjustments. These changes will create tariffs on goods based on the emissions produced in their production. For Canadian industries eager to break into new foreign markets, this transition could mean both challenges and opportunities.
“Nothing will outdo Indigenous resistance.” This statement makes an implicit but powerful case for collaborative multimodal climate action, placing an Indigenous-led approach on the same table as big industrial carbon pricing.
