Environment and Climate Change Canada released a discussion paper that explores either an industry-specific cap-and-trade system or a modified carbon price to enforce a hard limit on emissions. (The Logic)

Talking point: The document provides the first details on exactly what mechanism might guide efforts to cap and cut emissions in the oil and gas sector, which accounted for roughly 27 per cent of Canada’s emissions in 2020. A cap-and-trade system specific to the industry may “include mechanisms to mitigate volatility in the market price of emission allowances,” according to the document, by establishing a minimum benchmark price. Such a trading system could potentially set the stage for market controls sought by heavy emitters. The second option would amend the current carbon tax regime so it applies to energy producers in ways that incentivize deeper emissions cuts. Environmental Defence said the proposed cap is “a critical test for the federal government” as it seeks to reach net-zero emissions. The Canadian Association of Petroleum Producers did not immediately respond to a request for comment.