The Cement Association of Canada (CAC), along with 12 other leading firms, business associations and climate policy and renewable energy groups across the country from the energy, manufacturing and steel sectors, is proposing five ways to improve the country’s industrial carbon markets.
The groups contend industrial carbon pricing is the best way to get industry to reduce emissions, but the system isn’t working as well as it could because of barriers and red tape between provinces.
Industrial carbon pricing shifts the burden for the damage from greenhouse gas emissions to those who are responsible and able to avoid it. Instead of dictating who should reduce emissions, a carbon price allows emitters to lower their emissions or continue emitting and paying for their emissions.
In an open letter sent recently to provincial ministers of the environment, the firms, associations and groups laid out their proposed fixes to the problem.
“Industrial carbon markets are the most flexible and cost-effective way to incentivize industry to systematically reduce emissions. Yet this critical policy isn’t working as well as it should,” their letter reads.
“A patchwork of provincial carbon pricing systems has produced numerous barriers and created significant red tape across efforts to decarbonize our economy.”
The associations said the purpose of their letter is to raise a red flag about how the provincial carbon markets work together, or more correctly, how they do not.
“The disconnect across nine different markets makes it harder to invest in major projects in Canada. It is holding back capital, economic growth, jobs and decarbonization. We need to act now to fix this.”
Canada is less than two years away from a scheduled 2026 review of industrial carbon pricing systems, yet in Ottawa the work has already begun.
“Now is the moment for provinces to come together to tackle these challenges and demonstrate leadership. Provinces should seize this opportunity to improve industrial carbon markets from coast to coast to coast.”
For one, the groups are concerned that carbon credits generated in one province are not recognized in another. They argue the industry should be free to buy and sell carbon credits across provincial borders.
The groups are lobbying for the removal of interprovincial trade barriers that prevent a carbon credit generated in one province from being recognized in another. Projects that reduce or remove carbon emissions generate carbon credits or carbon offsets which are bought and sold in carbon markets.
They also want to create and align high-integrity offset protocols for reductions or removals that are permanent, additional and verifiable as they provide more pathways for industry to pursue decarbonization.
“The current patchwork of protocols across provinces can be aligned over time but we need to start now to boost decarbonization and seed important new industries such as carbon dioxide removal.”
Carbon credit markets also need to be more transparent, the groups say, because investors must contend with several different carbon credit markets and large emitter programs across Canada, and most do not provide public information about transactions or credit prices.
The groups say minor regulatory changes that increase transparency can make markets easier to navigate and understand.
To support decarbonization efforts, the groups want the provinces to create predictable, efficient and transparent programs to reinvest 100 per cent of industrial carbon pricing revenues back into industry to accelerate additional decarbonization.
“Enhanced revenue recycling would better position Canadian industry as a global source of low-carbon products and help us to compete globally,” they wrote.
Carbon leakage, whereby a company moves its production from a province with stringent policies to one that is more lenient, should also be addressed with increased border measures to support vulnerable sectors.
“Border measures can prevent carbon leakage to jurisdictions with less advanced climate policies,” the group wrote, noting that the European Union is already implementing a Carbon Border Adjustment Mechanism.
In Canada, border measures are under federal jurisdiction, but provinces are stewards of their industrial carbon pricing systems.
“Provinces can and should push the federal government to accelerate the conversation about climate policy and the global competitiveness of Canadian industry,” the groups state.
The letter encourages the environment ministers to implement the recommendations and work together.
In addition to the CAC, other signatories to the letter include Alberta’s Industrial Heartland Association, Canadian Manufacturers and Exporters, Canadian Renewable Energy Association,
Canadian Steel Producers Association, Carbon Removal Canada, Chemistry Industry Association of Canada, Clean Prosperity, Enhance Energy, Heidelberg Materials, Kiwetinohk Energy, Itoa Energy, and Lafarge.
