$3B cap-and-trade bill not the budget black hole it seems
There he goes again. Ontario Premier Doug Ford has smashed up the climate-change china shop, broken everything in sight, and now we’re being handed a bill for $3 billion.
Or, as the NDP put it, “The direct result of Ford’s favour to big polluters will be $3 billion in costs piled onto the backs of the people of Ontario. That means ripping $3 billion right out of folks’ bank accounts, or cutting $3 billion from things like health care.” The Liberals chimed in too, but less colourfully.
It does sound bad, until one considers what the province’s Financial Accountability Office is actually saying. Accountability officer Peter Weltman rightly focuses on the news that cancelling the Liberal cap-and-trade plan is not quite the neat equation that we had been led to believe. That’s only part of the story, though.
The big picture number is still that ending cap-andtrade will save Ontarians about $7.2 billion over four years. What’s new is that the Ford government will retain a significant amount of the program spending that the Liberals were paying for with their cap-and-trade revenue.
While most of the Liberals’ 57 cap-and-trade-funded programs will be cancelled, keeping some programs will cost between $615 million and $787 million a year. Add that up over four years, and you get the $3 billion figure that Weltman uses.
For reasons clear only to themselves, the Ford administration has chosen not to allow Weltman to reveal the details of what we get for that money, although it would seem to be the critical point.
We do know that about $600 million of that spending this year is due to extending the life of programs that gave people things like window-replacement rebates and electric-car subsidies. Had the government not done that, it would have been rightly criticized for denying people benefits they had signed up for in good faith.
In an interview, Environment Minister Rod Phillips said the retained programs are for housing and transit. The government will also spend $95 million on school upgrades, a program for which it was earlier criticized for cancelling. The thinking is that these expenditures are worthwhile, but the new government doesn’t want to cover them with a carbon tax.
In the meantime, it’s amusing to see the Liberals complaining because not all of their green programs have been eliminated. As for the NDP, well, they are easily excited. No one is going to be ripping money out of people’s bank accounts or cutting billions of dollars in health spending.
Weltman’s report raises a second interesting point. He compares the costs of Ontario’s former cap-and-trade program with the new federal carbon tax that Ontarians might now face.
If cost were your only criterion, cap-and-trade comes out ahead. When the Liberal plan ended, it was imposing a carbon price of $18.70 a tonne. The Trudeau carbon tax starts next year at $20 a tonne, then rises to $50 a tonne by 2022. That’s just over twice as much as capand-trade would have cost that year.
If one were looking for a cheap way to get off the climate-change hook, capand-trade was it. There were just two problems. Cap-andtrade didn’t deliver much bang for the buck, and most of the bang took place elsewhere.
The Liberals aimed to cut greenhouse gases by 18.7 megatonnes. According to the government’s own consultant, only 3.8 megatonnes of that reduction would actually have been in Ontario. The rest would have taken place in the jurisdictions of Ontario’s emissions-trading partners, Quebec and California. To achieve it, Ontarians would have had to ship $466 million out of the province, money that would have been lost to our economy.
To put all this world-saving activity in context, the federal tax, while substantially more expensive, would still only be enough to meet half of Canada’s 2030 emissions targets. Those targets are vastly less than what the latest United Nations climate report says are necessary.
Put another way, if one believes the planet is terminally ill the provincial Liberals were promising to treat the illness with an Aspirin, while the federal Liberals would have us believe that two Aspirin would restore the planet to health. The Ontario PCs find all Aspirin unaffordable.
In summary, there is a reasonably significant cost hangover from the capand-trade plan, but we are getting something for the money. The cost will be covered with debt in the short term, tax dollars ultimately. As far as the cap-and-trade plan itself went, it was really only attractive to those who like to sound green without spending much, relatively speaking.