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Opinion

A primer on output-based carbon pricing: there’s probably more consensus than you think

By Christopher Ragan      

Meeting Canada’s climate targets in a way that is best for our economic prosperity requires broad policy that creates consistent incentives across all emissions in the economy, from individual households and small businesses to heavy industry. Output-based pricing must be a key part of that mix if Canada is to strike the right balance between pricing emissions and protecting competitiveness.

Economists agree that carbon pricing is the most flexible and cheapest way to reduce greenhouse gas emissions. Other options are certainly available, but they are more complicated and more costly for the economy. The Hill Times file photograph

The federal government’s “backstop” carbon-pricing policy will apply in provinces and territories that haven’t implemented a sufficiently broad and stringent policy of their own. The backstop has two parts. The first is the levy on the carbon embedded in fossil fuels such as gasoline and diesel; this is pretty straightforward. The second is a separate pricing system for large industrial emitters; this is the complex part that needs some explanation. Despite the complexity, however, it is interesting to see that governments of all political stripes seem to be adopting similar ways of treating the economy’s large emitters.

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