Background: In 2014,
Canada was the 16th country in terms of CO2 emissions per
capita with the emission of 15.1 metric tons of CO2 per capita 1.
Canada was also the 10th CO2 emitter country in the world
in that year by emitting 537,193 kt of CO2 1.
shows Canada’s primary energy supply by source in 2014. As it can be seen, more than
70% of primary energy supply in Canada is from fossil fuels (Coal, Natural gas,
Oil, and NGLs).
shows the percentage of electricity
generation from different sources in different provinces in Canada. As it can
be seen in the figure, renewable energy has a noticeable share in electricity
generation in Canada. Generation from renewable sources consists of 64% of the generation which is first among the G7
countries. Generation from non-GHG emitting sources also consists of 80% of the
generation which is second among the G7
countries after France.
Figure 1. Canada’s primary energy supply by source, 2014 2
Figure 2. Percentage of electricity generation in
Canada by source, 2014 2
shows the Percentage of electricity generation in each province by source in 2014. As it can be seen in the
figure, in British Columbia and Quebec, more than 85% and 95% of electricity is generated from renewable sources,
respectively. In Ontario, more than 80%
of electricity generation has been from emission-free sources (hydro and
Figure 3. Percentage of electricity
generation in each province by source, 2014
Canada’s energy landscape and its potential, one of the solutions for reducing
GHG emissions in Canada is using the emission-free
and renewable energy resources in the electricity
sector to replace fossil fuels used in
the overall energy system. Renewable sources, however, are of higher cost compared to conventional fuels.
Conventional fuels have also other advantages such as ease of transport and
The vast use of conventional
fuels worldwide has caused serious challenges. The National Climate Assessment
released in 2012 in draft form by the U.S. Global Change Research Program 3,
states that temperatures are increasing, precipitation patterns are changing,
and the frequency and intensity of storms have been altered as the result of
increases in GHG concentrations. The assessment claims that impacts and damages
are already being felt throughout the country, especially from extreme weather
events made more frequent and, in many respects, more intense because of global
warming. The assessment also states that heat waves and droughts are becoming
more likely and will be even worse in the future if global warming continues.
The most intense Category 4 and 5 hurricanes have become more frequent and
intense rains have become more common 3.
Despite these effects, the GHG
emissions have increased each year which means that increases in atmospheric
concentrations are actually accelerating, not stabilizing 4.
These issues show the emergence
for implementing a carbon control policy to stabilize and reduce the level of GHG emissions.
Cap-and-trade and carbon tax are
two carbon pricing mechanisms to reduce the GHG emissions and promote the
development of renewable energies. A carbon tax directly establishes a price on
GHG emissions, whereas a cap-and-trade program establishes the price indirectly
by limiting total emissions and issuing tradable emissions permits 5.
While both mechanisms make conventional fuels more expensive and provide
incentives for the development of emission reduction technologies, they have
different characteristics which lead us
to choose cap-and-trade over carbon tax
as the carbon pricing policy.
The most important difference of
cap-and-trade and a carbon tax is that a
cap-and-trade mechanism has volatility in carbon price but provides certainty
in the amount of GHG emissions reduction
while a carbon tax has uncertainty in the amount
of GHG reduction but provides a certain price for GHG emission.
In order to stop the effects of
climate change, the accumulated amount of emissions to the atmosphere should be
controlled because it is the accumulated emission that determines the magnitude of climate change. In this sense, the cap-and-trade mechanism is a better option than
carbon tax as it creates certain emission reductions each year and the
accumulated emissions over a specific number
of years can be controlled based on the thresholds announced by climate
The other advantage of cap-and-trade over a carbon tax is the successful pas experience in implementing
cap-and-trade systems. Two of these successful past
experiences are explained in the following.
1. Us cap-and-trade on acid rain: The Acid Rain Program (ARP)
starting in 1995, established requires major emission reductions of sulfur
dioxide (SO2) and nitrogen oxides (NOx), the primary
precursors of acid rain, from the power sector. The SO2 program
set a permanent cap on the total amount of SO2 that is emitted
by electric generating units in the United
States. The program was phased in, with the final 2010 SO2 cap
set at 8.95 million tons, a level of about one-half of the emissions from the
power sector in 1980. NOx reductions under the ARP are achieved
through a program applied to some coal-fired plants and is closer to a
traditional, rate-based regulatory system 6.
The Acid Rain Program (ARP) and Cross-State Air Pollution Rule (CSAPR) programs
were successfully implemented and significantly reduced SO?, annual NO?, and
ozone season NO? emissions from power plants 7.