Summarize the following in four sentences or less.:
Trudeau Urged to Move Quickly on Carbon Pricing Backstop

Brian Platt
Tue, August 8, 2023 at 12:53 p.m. GMT-4
(Bloomberg) -- Business and environmental groups are pushing Prime Minister Justin Trudeau’s government to quickly enact a program to guarantee carbon pricing revenue, or else lose out on the investments needed to reach Canada’s climate goals.

Most Read from Bloomberg

Everyone Wants to Work at UPS After Teamsters Deal

WeWork Tumbles After Raising ‘Substantial Doubt’ About Future

US Bank Shares Drop as Moody’s Cuts Ratings, Warns on Risks

Wall Street WhatsApp, Texting Fines Exceed $2.5 Billion

The Global South Breaks Away From the US-Led World Order

In a letter to Finance Minister Chrystia Freeland, they asked the government to open up access to the program — known as “contracts for difference” — as widely as possible, instead of doing individual deals with companies.

Carbon contracts for difference are effectively a public backstop for Canada’s carbon pricing regime. The contracts might be used to guarantee a floor price for carbon credits or to lock in the scheduled increase to the carbon price over the next decade, regardless of future government decisions.

The purpose is to give companies some long-term certainty about the economics of curbing emissions so they can make decisions involving billions of dollars in capital projects — such as installing equipment that captures greenhouse gas emissions before they escape to the atmosphere.

The letter is another sign of the pressure on the Canadian government to keep up with the US, its largest trading partner, which is providing lucrative tax credits for green manufacturing through the Inflation Reduction Act.

Read More: Subsidy Wars Heat Up With US Allies Forced to Pay Up or Lose Out

Business groups have also been pushing Trudeau and Freeland to speed up the launch of clean-energy tax credits that were promised in this year’s federal budget.

“The risk of taking too long is capital fleeing Canada,” said Etienne Rainville, director of government relations with Clean Prosperity, a group that advocates market-based climate programs and led the effort to send the letter.

The signatories range from the cement industry to fuel producers to environmental groups such as the Pembina Institute.

2030 Goals

Given how long it takes to build these projects, the government can’t afford to drag its feet on getting the program in place, Rainville said.

“The decisions that are being made today are ultimately the ones that will be coming online just before 2030,” he said, referring to Canada’s goal of reducing emissions by 40 to 45% below 2005 levels by the end of this decade.

Larger carbon capture projects, for example, need to be developed soon to achieve emissions targets, said Chris Hooper, vice president of capital markets for Entropy Inc. His firm, which signed the letter, has built a carbon capture and sequestration project at Alberta’s Glacier gas plant, but has other projects waiting on government policy for final investment decisions.

“Carbon price uncertainty is a significant barrier to the deployment of private capital,” Hooper said by email. “The federal government is best positioned to underwrite the federal policy risk associated with carbon price.”

The signatories make four recommendations: make the program as broad-based as possible, get it in place quickly, use clear eligibility criteria and ensure that a floor price for carbon credits is included.

This year’s federal budget pledged to launch consultations on designing contracts for difference, but so far there has been no update on doing so. The groups want details announced before the end of the year.

Freeland is still committed “to consulting on the development of a broad-based approach,” her office said in a statement, though it did not provide a timeline for doing so. The office has seen the letter and is “in close contact with a number of these organizations,” said spokesperson Katherine Cuplinskas.

There has been some movement on the clean-energy tax credits. On Friday, Freeland’s department circulated draft proposals for public feedback, including a long-promised tax credit for carbon capture systems. It also pledged to “soon release details” on a tax credit for hydrogen fuel production.