Ottawa's new carbon pricing plan will reward clean companies

The federal government added more meat to the bones of its core environmental policy Monday by releasing draft legislation on how pricing carbon pollution will work in Canada.

The new legislation is the federal backstop and will apply to all provinces that haven't created their own system and put it in place by September 2018.

Here are three things to take away from the proposed legislation:

1. Use more, pay more: Companies that exceed the average energy use for production in their sector will have to pay a carbon levy. Those that are under the average energy use by 30 per cent or more will get a credit for saving energy. The proposed output-based pricing system is similar to what's now being used in Alberta.
2. Waiting for electricity: The carbon price will affect all industrial sectors, including the oil and gas industry, refineries, pulp and paper and food processing. Fuel producers and distributors will also have to pay. But while the price on carbon will also apply to the electricity sector, it could take longer to decide how to apply the new system to that sector.
3. You are probably already covered: About 80 per cent of the Canadian population is already covered by existing carbon pricing systems. So far B.C., Alberta, Ontario and Quebec have full carbon pricing systems in place.

The price on carbon pollution will start at $10 a tonne this year and increase to $50 a tonne by 2022.

Environment Canada is launching public consultations this winter to get feedback from industry, provinces, Indigenous groups and the public.

Environment Minister Catherine McKenna expects most industries to accept the legislation as a practical solution to balancing the environment and but also maintaining a competitive economy.

"We don't want to send Canadian companies abroad to pollute," said McKenna in an interview with CBC's Power & Politics.

 "We want to have a system that creates an incentive for them to innovate to reduce their emissions, but also do it a way that recognizes that some other places don't have a price on pollution."  

The proposed legislation is getting a thumbs up from some environmental groups.

"This is exactly the kind of signal we want to send to the economy," said Erin Flanagan, federal policy director for the Pembina Institute, a non-profit think tank focused on energy and the environment.

"We want to reward consumers and businesses who are reducing their carbon footprint, so this is moving us in the right direction."

The spokesperson for the Canadian Association of Petroleum Producers said the industry organization is reviewing the proposed law. Chelsie Klassen wrote in an email to CBC News that the organization  wants to make sure any carbon price doesn't put producers at a disadvantage — something it's been saying since the federal government announced it would introduce a price on carbon over a year ago. 

"We believe that any government actions that work to attain their climate commitments must also advance Canada's competitiveness to attract capital and position Canada as a viable choice to meet global energy needs," said Klassen.

Provinces have until March 31

This new legislation is part of the Pan Canadian Framework on Clean Growth and Climate Change that was agreed to by most provinces and territories and the federal government in December 2016.

The federal government is giving the provinces until the end of March to choose whether they want to implement their own system, or go with the federal system.

Should they choose their own system they have to have outline details of how their provincial system would work by Sept. 1.

Manitoba is proposing a flat $25-a-tonne carbon price, which will be in compliance with the federal system until mid-2020.

Nova Scotia is proposing a provincial cap-and-trade system that may or may not meet federal standards.

New Brunswick, P.E.I., Newfoundland, Nunavut and Northwest Territories have not yet set up their carbon pricing systems.

Yukon has decided to adopt the new federal system.

Saskatchewan has threatened to go to court to fight the federal government's proposed plan.