Number two, the current regime is in trouble. In IISD’s submission to the federal consultation on carbon pricing, we detailed 10 ways in which the current regime urgently needs to be improved. Notably, these include requiring minimum effective prices, that is, prices for credits in secondary markets in provincial and territorial regimes. Recent prices in Alberta, for example, have ranged between $30 and $40 per tonne, a roughly 60% discount on the headline price. Weak effective prices diminish the incentives that the regime is supposed to provide and undermine the certainty needed for long-term low-carbon investments.
Number three, Canada needs a strong and rising post-2030 carbon price. Without an updated trajectory, the industrial carbon price will start to decline in real terms in just four years. This is a critical challenge for an instrument that is supposed to motivate multidecadal low-carbon investments. Modelling commissioned by IISD shows that a strong effective industrial carbon price reaching $380 per tonne in 2040 could reduce Canada’s emissions by over 100 megatonnes in 2040 relative to a status quo scenario. That’s equivalent to avoiding a year of emissions from almost all road transportation in Canada, while preventing over $30 billion in estimated climate-related damages, all with manageable economic impacts.