Canada

Canadian government policies on industrial decarbonisation

Net zero target Key climate policies Carbon pricing Hydrogen strategy Other policies Funding

Net zero target

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Further information: Net-Zero Emissions Accountability Act; 2030 Emissions Reduction Plan

Key climate policies

Canadian Net Zero Emissions Accountability Act

The Canadian Net Zero Emissions Accountability Act delivers on the government’s commitment to legislate a target of net zero greenhouse gas emissions by 2050. The Act establishes a legally binding process to set five-year national emissions reduction targets for 2030, 2035, 2040 and 2045. It will help develop credible, science-based emissions reduction plans to achieve each target. The Act established an independent advisory body, the Net Zero Advisory Body to provide ongoing advice to the government.

Further information: Canadian Net-Zero Emissions Accountability Act

2030 Emissions Reduction Plan

The 2030 Emissions Reduction Plan is an ambitious roadmap that outlines a sector-by-sector path for Canada to reach its emissions reduction target of 40% below 2005 levels by 2030 and net zero emissions by 2050.

This includes developing a CCUS strategy and investment approaches, such as Carbon Contracts for Difference.

Introducing an investment tax credit to incentivise the development and adoption of CCUS technology
Investing CAD 194 million to expand the Industrial Energy Management System to support ISO 50001 certification, energy managers, cohort-based training, audits, and energy efficiency-focused retrofits for key small-to-moderate projects
The plan includes projected emissions reductions from the oil and gas sector of 31% below 2005 levels, by 2030. It also projects emissions reductions from 39% below 2005 levels, by 2030 from heavy industries.
The Climate Action and Awareness Fund is investing over CAD 200 million over five years to support projects that help build capacity and raise awareness to reduce Canada’s GHG emissions.
The Canada Infrastructure Bank (CIB) was established to ensure that Canadians benefit from modern and sustainable infrastructure through partnerships between governments and the private sector. The government has allocated CAD 35 billion for the CIB to set out priority investment areas, which include green infrastructure (CAD 5 billion), public transit (CAD 5 billion) and clean power (CAD 5 billion).

Further information: 2030 Emissions Reduction Plan

Oil and Gas Sector Greenhouse Gas Emissions Cap

The Federal government has proposed a cap on the total emissions from Canada’s oil and gas sector. This will implement a national cap-and-trade system for oil and gas emissions, with the cap being phased in between 2026 and 2030. The 2030 emissions cap level will be in the range of 106 to 112 million tonnes (Mt) of greenhouse gas emissions. That level is 35 percent to 38 percent below 2019 emission levels. Publication of final regulations is targeted for 2025.

Clean Electricity Regulations

The Federal government has proposed Clean Electricity Regulations to help achieve the overall net zero electricity sector target for 2035. The proposed regulations would limit CO2 emissions from fossil fuel power plants to 30t per GWh of electricity produced, with limited exceptions for plants using CCS technology.

Carbon pricing

Federal Fuel Charge

The fuel charge applies to 21 fossil fuels including gasoline, light fuel oil (eg. diesel), and natural gas. As of April 1 2023, fuel charge rates mirror a carbon price of CAD$65 per tonne CO₂e. The federal fuel charge applies in Alberta, Saskatchewan, Manitoba, Ontario, Yukon and Nunavut.

Further information: Pan-Canadian Approach to Pricing Carbon Pollution; Greenhouse Gas Pollution Pricing Act: Annual report for 2020

Federal Output-Based Pricing System (OBPS)

The federal OBPS is designed to put a price on carbon pollution while minimising competitiveness and carbon leakage risks from exposure to the federal fuel charge. The federal OBPS is mandatory for facilities that are primarily engaged in the industrial activities listed in the OBPS Regulations and that emit 50kt CO₂ per year or more. Under the scheme, emissions in excess of allowances will be charged at $65 per tonne of CO₂e in 2023 and will increase by $15 per calendar year until 2030, resulting in an excess emissions charge of $170 per tonne of CO₂e in 2030. The federal OBPS applies in Manitoba, Ontario, New Brunswick, Prince Edward Island, Yukon, Nunavut and partially in Saskatchewan.

Further information: Pan-Canadian Approach to Pricing Carbon Pollution; Greenhouse Gas Pollution Pricing Act: Annual report for 2020; Output-Based Pricing System - Canada.ca

Other Carbon Pricing Mechanism

Provincial and territorial systems continue to apply in British Columbia (carbon tax), Quebec and Nova Scotia (cap and trade), Newfoundland and Labrador (carbon tax). All provincial and territorial carbon pricing systems have to set equivalent or greater carbon prices to the federal scheme.

Further information: Pan-Canadian Approach to Pricing Carbon Pollution; Greenhouse Gas Pollution Pricing Act: Annual report for 2020

Hydrogen strategy

of Canada’s end-use energy has the potential to be delivered by clean Hydrogen by 2050. Learn More

30% of Canada’s end-use energy has the potential to be delivered by clean Hydrogen by 2050.

Clean hydrogen has the potential to deliver up to 6% of Canada’s end-use energy (4 Mt of hydrogen) by 2030, and 30% by 2050 (20 Mt of hydrogen) abating up to 45 Mt CO₂e of GHG emissions by 2030 and 190 Mt CO₂e by 2050 through deployment in transportation, heating and industrial applications.

production of hydrogen from fossil fuels should use CCUS by 2030 Learn More

90% or greater production of hydrogen with CCUS by 2030.

The strategy states that production of hydrogen from fossil fuels without CCUS should be coupled with greater than 50% production of hydrogen from fossil fuels with CCUS, as soon as possible and move to predominantly greater than 90% production with CCUS by 2030.

Canada has the potential to produce vast amounts of hydrogen from natural gas coupled with CCUS. Thus, CCUS is an integral part of the Canada’s Hydrogen Strategy.

Further information: Hydrogen Strategy For Canada; Clean Fuels Fund

Other policies

A Healthy Environment and a Healthy Economy is the federal plan to build a better future with a healthier economy and environment. As part of this plan, Net Zero Accelerator of CAD 3 billion over five years, is being delivered via the Strategic Innovation Fund. This will rapidly expedite decarbonisation projects with large emitters, scale up clean technology and accelerate Canada’s industrial transformation across all sectors. The plan discusses the development of a comprehensive CCUS strategy and exploring other opportunities to help keep Canada globally competitive in this growing industry.

Funding

Recent CCUS funding

Canada Growth Fund and Carbon Contracts for Difference

The Canada Growth Fund has been established with CAD$15bn of backing.
The Fund will be providing contracts for difference for captured carbon, as well as hydrogen production, to give pricing certainty to project developers.
Tailored contracts will be available for large projects, while a broader contracts for difference scheme will be consulted on later this year.

Further information: Technical backgrounder: Canada Growth Fund

Carbon Capture, Utilization, and Storage Investment Tax Credit

The proposed tax credit for Carbon Capture, Utilization and Storage is being legislated following the 2023 Fall Economic Statement. It will provide a tax credit worth 50% of the capital cost of CCUS equipment for projects beginning before 2030, and worth 25% of these costs for projects beginning between 2031 and 2041.

Further information: Tax measures: Supplementary Information