Industrial carbon pricing is one of the most important policies Canada has for cutting climate pollution and creating a competitive clean economy. According to research from the Canadian Climate Institute’s 440 Megatonnes project, these carbon pricing systems—which are sometimes called large-emitter trading systems (LETS)—will do more to cut climate pollution between now and 2030 than any other policy.
What is industrial carbon pricing?
Large-emitter trading systems are a form of carbon pricing that apply to industrial facilities with large emissions that rely on international trade for a substantial part of their profitability. Policy experts call these sectors emissions-intensive and trade-exposed, and they typically include companies in sectors like cement, steel, aluminum, and oil and gas. This fact means the design of LETS differs from consumer carbon prices—which don’t apply to these sectors—and there are a variety of industrial carbon pricing systems in place across Canada.
Not only does industrial carbon pricing work by cutting huge amounts of greenhouse gas emissions, it can also protect industry competitiveness here in Canada. This is especially true if businesses in Canada are selling their products in markets with carbon tariffs, also known as carbon border adjustments. These markets include some of Canada’s largest trading partners, including the European Union and the United Kingdom.
Industrial carbon pricing helps firms attract investment for emissions-reduction projects. Firms can generate credits they can trade for cash, helping Canadian firms compete for international capital, at lower cost to governments than subsidies like those provided under the Inflation Reduction Act in the United States.
The Canadian Climate Institute has published extensively on industrial carbon pricing to help explain this topic and make it more accessible. More resources on this important policy area are listed below.
