According to a senior government source, Canada's budget will introduce a system to lock in future carbon credit prices, a move meant to boost investments by giving businesses certainty to develop low-carbon technologies
So-called contracts for difference set a price on tradable carbon credits, which heavy emitters can get if they reduce pollution. If the market price for the credit falls below the minimum in the contract, the government would make up the difference., which will be operational "in the coming months" and will be "particularly focused on large projects," said the source, who was not authorized to speak on the record.
Some heavy emitters such as oil sands producers say lack of pricing certainty has held them back from making significant investments in emission reduction projects like carbon capture and storage. They are also concerned that costly projects could be a waste of money if carbon pricing is scrapped in future.
Contracts for differences could be used by companies investing in carbon capture or hydrogen projects, the source said. Under Canada's carbon pricing rules, large industrial polluters pay per tonne of carbon emitted above a certain sector-specific threshold. Polluters can also generate credits by cutting emissions and then sell the credits, which has raised concerns that cheap credits will flood carbon markets in coming years as more large emissions-reduction projects start operating.
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