The federal government is set to scrap the carbon price and introduce a carbon tax instead.
That’s the outcome of a series of negotiations, which are expected to be completed by the end of March.
The changes are expected by 2020.
The government has already made clear its intention to scrap a previous cap-and-trade scheme that would have raised the price of carbon from $15 a tonne to $25.
Under the cap-trade, carbon emissions were capped at a fixed amount per unit of economic output, which was set to rise to $60 per tonne by 2020, or about $1,000 a ton.
The cap-the-trading scheme was to raise the price by 10 per cent on the value of carbon emissions.
It was eventually scrapped in 2019 under pressure from the provinces.
The government’s new approach would allow the government to take in a cap-based levy on carbon emissions and then pass it onto provinces.
That could raise the value per ton of carbon emitted, although it could also reduce the amount of money that would be available to the government for other purposes, such as funding infrastructure or paying for environmental remediation.
Under this new scheme, emissions would not be capped at $15 per ton, but would instead be adjusted every three years based on the market price of the fuel, and the value that would flow from it to other sectors of the economy.
The new system would mean that emissions would no longer be capped by province or industry.
It is expected that the federal government will make a decision to scrap cap- and-trade by March 2021, and will then begin the process of repealing the cap and trading system in 2021.
The repeal of the cap regime will affect the value-added tax, which is currently used to pay for federal climate policy.
It also includes the carbon levy, which will be scrapped.
What is the cap, and how does it work?
The cap is set at $30 per ton in 2020.
A reduction in emissions under the cap is allowed to take effect when the value rises below that cap.
The federal carbon price is currently $70 per ton.
Under an extension of the current carbon price to 2019, which the Conservatives have proposed, the price would be $80 per ton by 2021.
How will the carbon market work?
The carbon market is expected to operate through 2020 and 2021.
A carbon tax is the only type of levy that applies to the market.
Under its current rules, the federal carbon tax would be applied to all types of emissions, including those that emit CO2.
Under the new system, a levy on emissions will be applied only to CO2-emitting sectors such as energy, forestry, transportation, and manufacturing.
Under a cap, emissions will only be taxed on the cost of carbon that flows from that sector to other industries, such that emissions from these sectors are reduced by 10 to 15 per cent each year.
However, there are some key differences between the two.
The carbon tax will be set at a rate of $10 a ton for the first three years, and $15 by 2020 and $25 per ton thereafter.
According to the Treasury Board of Canada Secretariat, the cap will also apply to a wide range of activities, such an energy sector, transportation sector, and public health sector.
The tax will not apply to the transportation sector.
The carbon tax has the advantage of being an indirect tax, so there is no cost to the industry or consumer.
The amount of tax that would go to the sector is set by the government, and is calculated based on an assumption that the economy will grow in the future.
In other words, there is a chance that some of the tax revenues will be used to fund other types of climate initiatives, such like environmental remediated infrastructure, environmental mitigation, or funding for climate-related projects such as road repairs.
The government has previously argued that the carbon pricing will help to fund climate-change mitigation measures, but that has not been borne out in practice.
A report by the independent Parliamentary Budget Officer concluded that the tax would reduce emissions, but also added that it is uncertain how the policy would work for the long-term.
If the government’s policy is to replace the cap with a carbon price, will it actually reduce emissions?
The federal cap and trade scheme, which began in 2014, was designed to lower emissions in the short-term, by shifting to a market-based system.
The plan was to reduce emissions by about 2 per cent a year for the next five years.
Under that plan, emissions from the energy sector would be capped, while emissions from transportation and forestry would not.
The price would increase each year, and then gradually decline over the next two decades, eventually stabilising at $60 a ton in 2019.
In practice, however, the plan has not delivered on its goals.
A recent analysis by Environment Canada concluded that emissions have continued to rise even as the price has