On Industrial Carbon Pricing (Again)
This morning, I sat down to listen to a few experts talk about growing Canada’s relationship with the ASEAN region as we seek to diversify away from over reliance on the US. So far, the focus of the new federal government for trade diversification has been on the EU, with Asia primed for at least some of the spotlight in the next few months.
This all comes against an evolving backdrop on climate-related policy - specifically, industrial carbon pricing.
For the third time, today, major Canadian energy companies’ executives have sent a public letter to the Prime Minister with a list of demands, some of which I definitively agree with. Removing the industrial carbon price - or at least subordinating it to provinces - is part of it, and I couldn’t agree less.
I think it’s worth providing some context:
China (yes, the world’s largest emitter) has announced it will set absolute emission caps on several industrial sectors starting in 2027, after piloting several statewide carbon pricing systems for several years.
India (the world’s third largest emitter) has this year begun transitioning into the initial phase of its own industrial carbon pricing system, the CCTS.
The Philippines is set to launch its own carbon trading rules this month.
Indonesia’s Emissions Trading System was launched in 2023.
Many other countries - Global North or Global South - have either implemented carbon pricing across their geography, or are seriously contemplating it.
If we want to get into the weeds - yes, there are flaws with many of these systems, and the headline price on carbon (today, $95/tonne) is among the higher ones (see International Carbon Action Partnership’s diagram of allowance prices over the last decade, with Canada in orange). I think it’s worth recirculating this analysis from the @Canadian Climate Institute outlining the average price of carbon paid is substantially lower than the headline (less than $10/tonne).
Allowance Pricing 2014-2024 (ICAP, 2025)
The elephant in the room is, of course, the US. This, despite the fact that over the weekend, California state lawmakers passed legislation extending the state’s cap and trade (now cap-and-invest) program to 2045.
So it seems to me that the inclusion of requesting the subordination of industrial carbon pricing (effectively, its removal) in this letter is a tacit admission by these companies that “globally cost competitive” means almost singularly “uniquely competitive with the United States”.
It’s 2025, and it’s a different world than it was just a few years ago, I get it – adapting to circumstances, especially extraordinary ones, is key to moving forwards. I could, for instance, get on board with a freezing of the federal headline price for a few years, instead of it ratcheting up to $170/tonne by 2030, as was originally legislated.I’m expecting an announcement on Canada’s new climate competitiveness strategy soon from Prime Minister Carney’s government - and I expect it to be reflective of the context today.
We’re in a new and evolving global order - but that doesn’t mean climate change ceases to exist, and certainly not for those countries with whom we seek to build stronger alliances. Removing the single most effective tool we’ve implemented to deal with it would be unwise.
