Canada could miss out on up to 33 megatonnes of emissions reductions per year by 2030, unless governments expand the use of carbon contracts for difference to provide greater revenue certainty for new low-carbon projects. This is the top finding from new modelling released today by Clean Prosperity and Navius Research.
These 33 missing megatonnes include emissions reductions that the federal 2030 Emissions Reduction Plan (ERP) expects to achieve with industrial carbon pricing. Cumulatively, the 33 megatonne annual gap could represent hundreds of additional megatonnes of industrial emissions over the next decade.
“Uncertainty in provincial carbon markets is holding up big investments in industrial decarbonization,” said research author and Clean Prosperity Director of Policy and Strategy Brendan Frank. “The federal government is addressing that problem by signing carbon contracts for difference for specific low-carbon projects. But our new modelling shows that Canada’s 2030 climate targets may be at risk if we don’t offer that same level of revenue certainty to firms right across the economy.”
“Canada’s 2030 climate targets may be at risk if we don’t offer revenue certainty to firms right across the economy.”
Clean Prosperity Director of Policy and Strategy Brendan Frank
Clean Prosperity’s modelling also shows how the ERP likely underestimates the emissions reductions that can be achieved through industrial carbon pricing by 2030 — but only if carbon pricing is backstopped by contracts for difference.
Carbon contracts for difference are a government guarantee on the future value of carbon credits, which new low-carbon projects are counting on to generate revenue. As long as governments ensure the efficient functioning of carbon markets, they can use carbon contracts for difference to reduce business risk without imposing new costs on Canadian taxpayers.
Last year, the federal government committed $7 billion to carbon contracts for difference through the Canada Growth Fund. Clean Prosperity’s new findings strongly suggest that this is an important first step, but not enough.
In order for these contracts to achieve their enormous potential to drive industrial decarbonization — and catch all 33 missing megatonnes — the federal government must now expand the program so that firms right across Canada can access carbon contracts for difference. In addition, the federal government should support measures to ensure strong and ongoing demand for carbon credits.
The Canada Growth Fund can lay the groundwork for an expanded contracts for difference program by publishing a memo detailing the program’s design and eligibility criteria, developing standardized contracts that will reduce administrative and regulatory complexity and encourage uptake, and looking for ways to maximize the impact of its $7 billion allocated to contracts for difference.
Read the report: Missing Megatonnes
For more information: media@cleanprosperity.ca
