The federal government of Canada has identified significant issues with Alberta's current carbon policy. An oversupply of carbon credits has flooded the market, causing the price of credits to drop to approximately $40 per tonne. This market imbalance suggests that the existing framework is not effectively driving emissions reductions. The federal government is now considering more lenient terms or adjustments to address the inefficiency of the credit system.
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Typical market design failure. If you flood the system with credits, the price collapses and the incentive to actually decarbonize disappears. The question is whether they will fix the supply cap or just change the rules to hide the inefficiency.
Forty dollars per tonne is way too low to trigger any real industrial shifts. Most companies will just buy their way out of compliance rather than investing in new tech at those rates.
I wonder where these excess credits are coming from. If they are just legacy offsets with no real additionality, the whole system is a wash. Does the briefing specify which sectors are overproducing credits?
