ELECTRIC FEDERALISM POLICY FOR ALIGNING CANADIAN ELECTRICITY SYSTEMS WITH NET ZERO

The report identifies four critical policy challenges in Canada's transition to a net zero electricity system by 2035: misalignment of federal climate policy, lack of coordination among provincial institutions, potential upward pressure on electricity rates, and weak incentives for interregional grid integration. To address these, the authors propose a framework of 'electric federalism' involving strengthened carbon pricing, the implementation of performance standards, and the use of government tax bases to fund infrastructure investments to protect low-income ratepayers. The report emphasizes the need for provincial regulators to have mandates explicitly aligned with climate goals and suggests that the federal government use negotiated agreements—similar to health transfers—to provide financial support conditional on provincial policy reforms.

• The federal government's current output-based pricing system (OBPS) for electricity is inefficient because it uses fuel-specific benchmarks that incentivize reducing emissions intensity within a fuel type rather than replacing high-emitting sources with non-emitting ones.
• To ensure the 2035 net zero electricity target is met, the report recommends combining a strengthened carbon price with a federal Clean Electricity Standard that bars new unabated natural gas generation and requires remaining emissions to be offset by verified negative emissions.
• Provincial electricity regulators often lack clear mandates to prioritize climate goals, which can lead them to block cost-effective, net-zero-consistent investments if they are perceived as raising costs for ratepayers.
• Transforming electricity systems to net zero may put upward pressure on electricity rates, which could disproportionately affect low-income households and undermine political support for the transition.
• The authors argue that because net zero electricity systems provide broad societal benefits, a portion of the investment costs should be funded through the general tax base rather than recovered solely from ratepayers.
• Interregional grid integration is a least-cost pathway for decarbonization, yet Canadian systems remain siloed due to formal barriers like self-sufficiency mandates and informal barriers such as institutional inertia.
• The report proposes 'negotiated agreements' where the federal government provides stable long-term funding to provinces conditional on specific reforms, such as updating regulator mandates and developing comprehensive energy plans.
• Investments in electricity generation, transmission, and distribution are projected to result in 262,000 direct and indirect jobs by 2050, nearly tripling current employment levels.

APA

Canadian Climate Institute (2022). ELECTRIC FEDERALISM POLICY FOR ALIGNING CANADIAN ELECTRICITY SYSTEMS WITH NET ZERO. https://climateinstitute.ca/wp-content/uploads/2022/05/Electric-Federalism-May-4-2022.pdf#page=51

Chicago

Canadian Climate Institute. ELECTRIC FEDERALISM POLICY FOR ALIGNING CANADIAN ELECTRICITY SYSTEMS WITH NET ZERO. 2022. https://climateinstitute.ca/wp-content/uploads/2022/05/Electric-Federalism-May-4-2022.pdf#page=51.

Wikipedia

{{cite report |author=Canadian Climate Institute |title=ELECTRIC FEDERALISM POLICY FOR ALIGNING CANADIAN ELECTRICITY SYSTEMS WITH NET ZERO |date=May 2022 |url=https://climateinstitute.ca/wp-content/uploads/2022/05/Electric-Federalism-May-4-2022.pdf#page=51 |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{canadianclimateinstitute2022electric, author = {{Canadian Climate Institute}}, title = {{ELECTRIC FEDERALISM POLICY FOR ALIGNING CANADIAN ELECTRICITY SYSTEMS WITH NET ZERO}}, institution = {Canadian Climate Institute}, year = {2022}, month = may, url = {https://climateinstitute.ca/wp-content/uploads/2022/05/Electric-Federalism-May-4-2022.pdf#page=51}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }