Cap-and-trade exit a good deal
Saving a lot with little effect on emissions
The new PC government says it can wrap up Ontario’s capand-trade program for the low, low price of $5 million. That’s a confounding number for those who predicted that ending cap and trade would be a fiasco that would cost billions of dollars, but the government has built a plausible case for its figure.
Even if $5 million proves low, getting out of cap and trade would be a bargain at 100 times that amount, because the Liberal climate change plan delivered minimal greenhouse gas reductions at a cost to Ontarians of $2 billion a year. This was climate change lite, not a program with real environmental impact.
NDP Leader Andrea Horwath has argued that ending cap and trade would be immensely costly. She doesn’t seem to understand how the program worked. It was a pay-as-you-go plan, with each year’s emissions permits covering the cost of a grab bag of government expenditures meant to reduce greenhouse gases in that year.
The idea that companies could claim a refund for what they have paid over the last 18 months just doesn’t make sense. Companies have used the permits for which they paid. Or, to be more precise, the permits for which Ontario consumers paid. Most of the costs of cap and trade were passed through to consumers of home heating fuel and gasoline.
According to the government’s calculation, households would have paid $1.4 billion in cap-and-trade costs next year, businesses $500 million. Governments would have paid $75 million.
By the government’s calculation, there is only $72 million of outstanding permit costs that will not be passed on to consumers. Of that, $67 million is future emissions permits held by speculators. They won’t get repaid for their gamble, nor should they.
The government has not told us how much it will have spent on the long list of cap-and-trade programs by the time the whole thing is wrapped up. Less than what has been taken in, presumably. That’s a good topic for the auditor general or the financial accountability officer, but a net saving would be a plus, not a minus.
Those who want action on carbon reduction should not lament the end of the Liberal cap-and-trade plan. It did next to nothing to reduce emissions in Ontario. The Liberals aimed to cut greenhouse gases by 18.7 megatonnes.
Unfortunately, according to the government’s own consultant, only 3.8 megatonnes of that reduction would actually be in Ontario. The rest would take place in the jurisdictions of Ontario’s emissions trading partners. To achieve that, Ontarians would have had to ship $466 million to Quebec and California, money that would have been lost to our economy.
As a planet-saving scheme, the Liberal program didn’t really stack up. B.C. has a carbon tax of $35 a tonne and Alberta’s is $30. The Ontario plan amounted to $18 a tonne.
All of those are well short of what the federal government has promised, which is $50 a tonne by 2022. That’s still only half what would be required to meet Canada’s 2030 emissions targets, according to an internal federal report.
Carbon tax true believers like federal Environment Minister Catherine McKenna keep telling us that a carbon tax would be good for the economy. That’s not what was found by a provincial consultant cited in a 2016 Ontario auditor general’s report.
The consultant said cap and trade would accomplish little in Ontario, but with a minimal impact on the economy. Achieving the same reduction goal entirely in Ontario with a carbon tax and the same kind of spending on reduction programs had a much different result. Instead of reducing our gross domestic product by just 0.03 per cent, it would have cut it by 0.40 per cent. The cost of reducing carbon would have been $69 a tonne and one-third of the emissions reductions would have been the result of businesses leaving Ontario. So no, a carbon tax is not an economic stimulator, whether it is revenue neutral or spendingheavy, like the Ontario plan.
Horwath, speaking in question period Thursday, argued that big polluters are getting a gift and the little guy is getting screwed. Wrong on both counts. Ontarians and the governments they pay taxes to are the big winners in the demise of cap and trade. They paid three-quarters of the cost. Yes, higher income people will benefit more from the change because they pay more for home heating and driving. A low-income renter without a car won’t save much, but he wasn’t paying much, either. That’s how tax changes work.
The bottom line is that the Ford administration has saved Ontarians $2 billion a year for an inconsequential environmental impact. Many people would call that a good day’s work.