Nova Scotia is implementing a cap and trade program because it allows us to build on the province’s success to date in reducing greenhouse gas emissions in a cost-effective way.
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 put a price on carbon pollution using either a carbon tax, a cap and trade program, 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 greenhouse emissions, but it depends on the tax level. It is not certain how much emissions would be reduced.
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 is covered by its allowances, it can buy more allowances from another company that has emitted less. Over time, the province reduces the total cap, which means fewer allowances are available and there is a greater 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, Ontario, 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 to 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 but preserves the requirement to reduce GHG emissions. It also addresses competitiveness and trade concerns, and gives companies time to invest in efficiency and adopt newer technology.
We anticipate about 20 companies will participate in the cap and trade program
- Facilities where certain GHG activities take place and that emit 50,000 tonnes of GHG emissions or more per year. Electricity producers are captured in this category.
- Petroleum product suppliers that import or produce 200 litres of fuel or more per year for consumption in the Nova Scotia market.
- Natural gas distributers that deliver natural gas for consumption in Nova Scotia that, when combusted, produces 10,000 tonnes of GHG emissions or more per year.
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 companies 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 the cap to companies for free. The proposed program will not require the participation of individuals and small businesses directly.
Legislation and Regulations
Amendments to the Environment Act were passed in October 2017. They were proclaimed February 15, 2018. These amendments allow government to create the cap and trade program and regulations to support it.
The first set of regulations are now in effect. They require certain companies to report their GHG emissions and get them verified by a third party.
Consultation will take place late this spring on a second set of regulations for the cap and trade program.
The cap and trade program will begin in January 2019.