On 19 September 2024, Bill 487, An Act to End the Carbon Tax by Implementing a Cap-and-Trade Program, was introduced in the Nova Scotia House of Assembly. This bill aims to overturn existing carbon pricing systems and implement an Atlantic-wide cap-and-trade program.
Nova Scotia previously had a provincial Cap-and-Trade program introduced in 2017 by the previous Liberal government, led by then Premier Iain Rankin. The program met the requirements of the federal benchmark for carbon pricing from 2018 to 2022, avoiding the federal fuel charge or Federal Output-Based Pricing System (OBPS) being imposed as a backstop.
The Cap-and-Trade program took effect on 1 January 2019, regulating 22 companies with 31 regulated facilities. Facilities with annual emissions of 50,000 tCO2e and above were mandatory participants, including petroleum suppliers, natural gas distributors, and electricity importers. Voluntary participants and market participants were not permitted, closing the market solely to those mandatory entities. Despite using the CITSS platform, the program never linked with the Western Climate Initiative (WCI) joint market between California and Quebec’s respective Cap-and-Trade programs.
Premier Tim Houston, leader of the Progressive Conservative Party of Nova Scotia, repealed the cap-and-trade program in 2022. The last auction for regulated parties to complete compliance for the final compliance deadline under the program in December 2023 took place in August 2023.
The program was replaced by a provincial OBPS, submitted and approved by Environment and Climate Change Canada (ECCC) against the updated Update to the Pan-Canadian Approach to Carbon Pollution Pricing 2023-2030 (federal benchmark). The first compliance period of the OBPS began on 1 January 2023, regulating eight mandatory facilities emitting 50,000 tCO2e annually or above and seven voluntary facilities meeting the minimum 10,000 tCO2e annual emissions threshold. Rather than complying with all covered emissions under a Cap-and-Trade system, the OBPS provides emissions limits based on carbon intensities at the facilities, wherein facilities only comply with those emissions exceeding their limit.
Facilities regulated under the OBPS are exempt from paying the federal fuel charge. While the OBPS meets the benchmark requirements for industrials, the province did not develop a carbon levy. As a result, in July 2024, the federal fuel charge was imposed as the backstop.
Due to rising prices, in October 2023, Prime Minister Justin Trudeau announced an exemption for heating oil from the fuel charge. This was aimed at reducing household costs, particularly for rural and low-income households in Atlantic Canada. However, the fuel charge continues to be a point of contention for the province, with Rankin introducing Bill 487 to remove the backstop.
In a press release, the Nova Scotia Liberal Party announced its proposal to reintroduce a Cap-and-Trade system, extending its intention to enact an Atlantic-wide cap-and-trade model. This would require agreement from neighbouring provinces and the repeal of their respective systems.
ClearBlue will continue to monitor the progress of Bill 487 and provide updates to clients.