Canada’s electricity system is not expected to experience large cost increases from carbon taxes, according to a recent study by the Canadian Energy Research Institute (CERI). The study, which examined the impact of carbon management policies on Canadian electricity prices was completed in June of this year. It concluded that in most cases, “…the low emitting nature of most Canadian electricity systems suggest that carbon management policies will have minimal impacts on retail electricity prices”.
The pricing of carbon is a dynamic process. Since the report was released, Ontario has abolished its cap and trade program. This leaves British Columbia, Alberta, and Quebec as the only remaining provinces with carbon pricing systems. In January of 2019, the Federal government will implement a “carbon price backstop,” which is intended to enforce a fee on carbon emissions in provinces and territories that are without a carbon pricing mechanism. The CERI study examined the impact the back stop price will have on industrial and residential energy consumers.
The study found that carbon pricing will only have a notable impact in three provinces – Alberta, Saskatchewan and Nova Scotia. It is in those three provinces that a significant portion of their electrical power is derived from emissions generating fuels such as coal and natural gas. The balance of the country generates electricity from fuel sources such as hydro and nuclear that are considered emissions free.
Saskatchewan will experience the largest impact under the federal program. There, electricity prices are projected to rise 6% for large industrial users and 3% for residential customers in the period from 2018 – 2030. For Nova Scotia, the increases over that time period are expected to be 4% for industrial users and 2% for residential consumers. In Alberta the impact is thought to be less than 1%.
From 2005, the Ontario government took steps to eliminate coal power plants and in 2015 Alberta announced similar steps to retire its coal fleet by 2030. These actions, along with the relatively emissions free electricity sector in Canada means that over the next 12 years, carbon pricing is projected to have only modest economy wide impacts.