Policy Forum: Are Carbon Contracts for Difference Well Suited for Canada?

Wei Cui ()
Additional contact information
Wei Cui: Peter A. Allard School of Law, University of British Columbia

Canadian Tax Journal, 2025, vol. 73, issue 1, 95-105

Abstract: At least up to the release of the federal 2024 budget, many Canadian politicians, climate policy think tanks, and industry groups promoted carbon contracts for difference (CCfD) to complement carbon pricing. This commentary urges caution against the broad adoption of CCfDs. The author begins by noting that the current designs of provincial output-based pricing systems (OBPS) are not consistent with the expectation of the systems delivering robust price signals. He argues that CCfDs depend on such price signals, and they are not a plausible policy for encouraging the emergence of such signals. The author then argues that it is hard to justify the government making a bet against itself on the "policy price" of carbon. An extensive scholarly literature has long argued against providing businesses with "certainty" against future policy changes in general, and there is little reason to think carbon pricing is relevantly different. The author concludes that, overall, the use of CCfDs should remain narrowly targeted.

Keywords: Carbon contract for difference; carbon pricing; climate change; emissions-trading system; output-based pricing system; policy certainty (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.ctf.ca/EN/Publications/CTJ_Contents/2025CTJ1.aspx (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ctf:journl:v:73:y:2025:i:1:p:95-105

Ordering information: This journal article can be ordered from
Canadian Tax Foundation, 145 Wellington Street West, Suite 1400, Toronto, Ontario, Canada M5J 1H8
https://www.ctf.ca/E ... ns_ListingBooks.aspx

DOI: 10.32721/ctj.2025.73.1.pf.cui.ccfd

Access Statistics for this article

Canadian Tax Journal is currently edited by Kim Brooks, Kevin Milligan, and Daniel Sandler

More articles in Canadian Tax Journal from Canadian Tax Foundation Canadian Tax Foundation, 145 Wellington Street West, Suite 1400, Toronto, Ontario, Canada M5J 1H8.
Bibliographic data for series maintained by Jim Lyons ().