How Canada’s pollution pricing system works
January 14, 2025
Canada’s pollution pricing system is a key part of the country’s plan to reduce greenhouse gas emissions and fight climate change. The system puts a price on carbon pollution, making it more expensive for businesses and individuals to emit greenhouse gases. This encourages them to reduce their emissions and invest in cleaner technologies.
How does the system work?
The pollution pricing system has two main components:
- A carbon tax: This is a tax on fossil fuels, such as gasoline, diesel, and natural gas. The tax is applied to the amount of carbon dioxide (CO2) that is emitted when these fuels are burned.
- A cap-and-trade system: This system applies to large emitters of greenhouse gases, such as power plants, factories, and oil and gas companies. These emitters are given a certain number of allowances, which represent the amount of greenhouse gases they are allowed to emit. If an emitter exceeds its allowance, it must buy additional allowances from other emitters that have reduced their emissions below their allowance.
Who pays the carbon tax?
The carbon tax is paid by businesses and individuals when they purchase fossil fuels. The tax is passed on to consumers in the form of higher prices for goods and services.
Who pays for the cap-and-trade system?
Large emitters of greenhouse gases pay for the cap-and-trade system. They must either reduce their emissions or buy additional allowances from other emitters that have reduced their emissions below their allowance.
How is the money used?
The revenue from the carbon tax and the cap-and-trade system is used to fund a variety of programs, including:
- Investments in clean energy and energy efficiency
- Rebates for energy-efficient purchases
- Support for low-income households
- Research on climate change
What are the benefits of the pollution pricing system?
The pollution pricing system has a number of benefits, including:
- It reduces greenhouse gas emissions and fights climate change.
- It encourages businesses and individuals to invest in cleaner technologies.
- It creates jobs in the clean energy sector.
- It provides support for low-income households.
What are the challenges of the pollution pricing system?
The pollution pricing system has also faced some challenges, including:
- It can increase the cost of living for some people.
- It can be difficult to implement in a way that is fair and equitable.
- It can be challenging to enforce the system.
Overall, Canada’s pollution pricing system is a key part of the country’s plan to reduce greenhouse gas emissions and fight climate change. The system has a number of benefits, but it also faces some challenges. The government is working to address these challenges and make the system more effective.
How Canada’s pollution pricing system works
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