CAP-AND-TRADE WILL MEAN GAS PRICES GO UP.
• Business leaders are questioning both the timing and the implementation of Ontario’s new capand-trade program, unveiled Thursday as part of the provincial budget.
The program, which had been previously announced, though not in full detail, seeks to place a cap on greenhouse emissions in the province, with annual reductions to meet a 2020 target. Industry groups are calling on Premier Kathleen Wynne to continue to consult with provincial businesses on its implementation.
Cap- and- t rade will go i nto effect January 2017 and the Liberals predict the program will raise $ 1.9 billion in its first full year of operation — money that will be reinvested into funding “emissions- reduction initiatives.” The government said the money will not be used to balance the budget.
Dan Kelly, president and chief executive of the Canadian Federation of Independent Business, criticized the timing of the policy, saying that it will hurt business in the province at a time when industry is just beginning to recover from the previous recession.
“It just seems crazy to us that the government would look at 2017, when the economy is still in pretty rough shape, to introduce this giant new tax taking billions out of the economy and into projects that have yet to be determined,” he said.
Cap- and- trade will force emitters in covered sectors to buy carbon credits if they exceed emission caps, while companies that beat targets will be able to sell their additional allowances in a carbon credit market.
While the program will raise costs for businesses, some industry groups applauded the Liberals for implementing it in a business-friendly way, including delaying implementation for some sectors to allow them time to adapt.
“We’re encouraged by the approach the government has taken … that the proceeds are not used under general revenues,” said Karl Baldauf, vice-president of policy and government relations at the Ontario chamber of commerce. “What they need to do now is work with the business community on how to spend this money.”
In addition to businesses, the program will increase costs on motorists and most homeowners in a bid to lower Ontario’s emissions and help fight climate change. Part of the program will include adding an additional tax of 4.3 cents per litre on gasoline and $5 a month on the average natural gas bill.
Patrick Brown, leader of Ontario’s Progressive Conservatives, warned that the Liberals could use cap- andtrade revenue to help lower the deficit, especially as the government intends to go from a $4.3 billion deficit in 2016-17 to a balanced budget in the next fiscal year.
“I would be concerned that ( it’s) going to be used for general revenue,” he said. “My concern around capand- trade is that it won’t be used to combat climate change, but it’s going to be a revenue grab for the government.”
The opposition also took aim at the policy for not being revenue neutral for consumers, something seen when cap- and- trade programs were introduced in other jurisdictions, such as British Columbia.
“Other jurisdictions did things in an opposite way,” said Andrea Horwath, leader of Ontario’s NDP. “They took care of some of the lowest income folks.”
In announcing cap- andtrade, the Liberals highlighted the damage already done to Ontario from climate change, including the July 2013 rainstorm in southern Ontario, one of the province’s worst natural disasters that led to massive flooding and resulted in property damage estimated at nearly $1 billion in Toronto alone.
“For that reason, the government is proposing a capand- trade program to help Ontario meet its greenhouse gas reduction targets, reward innovative companies and ensure that households and businesses thrive within the transition to a low- carbon economy,” the government said in its budget.
The program is designed to give some temporary allowances to large polluters, with the government noting that immediate implementation poses risks for industries that have high emissions and face international competition.
Baldauf of the Ontario Chamber of Commerce said that the government should continue to consult with businesses on how exactly the funds raised from capand-trade will be spent if the program is to be successful.
“Consultation with the private sector is not over,” he said. “As we implement this, the government needs to continue to listen to business.”
ENCOURAGED BY THE APPROACH THE GOVERNMENT HAS TAKEN.