Nova Scotia’s Proposed Cap and Trade Program

Nova Scotia will implement a cap and trade program because it is a less expensive alternative for Nova Scotians, and it allows government to build on the province’s success to date in reducing greenhouse gas emissions, or GHGs.

Nova Scotians have an impressive record of fighting climate change by reducing emissions.  We’ve already met the national target of reducing emissions by 30% below 2005 levels, and we’re on track to reach 46% by 2030. 

Our efforts have focused on adding clean, renewable electricity to our energy mix. By 2020, more than 40% of our electricity will come from wind, hydro, tidal, solar and other cleaner energy sources.

In 2016, the federal government announced that all provinces and territories will be required to implement a carbon pricing mechanism that is either a cap and trade program, a carbon tax, or a hybrid approach. Nova Scotia is currently designing a cap and trade program.

The difference between a carbon tax and a cap and trade program

A carbon tax and a cap and trade program are both designed to reduce greenhouse gas emissions by attaching a price or cost to emissions. This creates an incentive to reduce emissions.

A carbon tax is a direct tax on fossil fuels (e.g. coal, oil or natural gas). It can reduce emissions, but it’s not always clear how much tax is needed to cause the right reduction. Some emitters can just pay the tax and pass the costs on to consumers, which may not help reduce emission levels.

Under a cap and trade program, a limit or “cap” on the total amount of greenhouse gas emissions allowed in the province is set, and participating companies are given allowances. If a company emits more than its allowance, it can buy allowances from another company that has emitted less. Over time, the province reduces the total cap, which means less allowances and a better incentive for companies to find ways to reduce their greenhouse gas emissions.

How Nova Scotia’s cap and trade program will differ from others

Jurisdictions like Quebec and California have agreements with each other that allow companies in their jurisdictions to trade greenhouse gas emission allowances.  At this time, Nova Scotia does not plan have agreements with other jurisdictions.

This means that all trading, investment opportunities, and actual greenhouse gas emission reductions will happen in Nova Scotia. We will regularly examine the opportunity to link to other programs.

Also, Nova Scotia will give most of the greenhouse gas allowances under its cap to companies for free. This lowers companies’ costs of complying. It also addresses competitiveness and trade concerns, and gives companies time to invest in efficiency and adopt newer technology.

Approximately 20 companies are expected to participate in the cap and trade program

They include:

  • Industrial facilities with annual GHG emissions equal to or greater than 100,000 tonnes CO2e covered at the point of emission.
  • Electricity sector at the point of emission
  • Petroleum product suppliers (i.e. diesel, gasoline, fuel oil, propane, etc.) that place more than 200 L of fuel per year into the Nova Scotia marketplace
  • Natural gas distributors

This program is designed to protect the pocketbooks of Nova Scotians

Cap and trade doesn’t create paperwork for families and small businesses. Only major fossil fuel companies and big industrial emitters and utilities will need to track their greenhouse gas emissions and participate in the program.

Nova Scotia’s program will recognize the investments already made by the electricity sector and will give most of the greenhouse gas allowances under its cap to companies for free. The proposed program will not require the participation of individuals and small businesses directly.

Next steps

The legislation and regulations to implement the cap and trade program are expected to be introduced in Fall 2017. Government will consult with stakeholders with an initial focus on the reporting regulations needed to support the cap and trade program.