Carbon pricing is working — so hands off
Cap-and-trade is working. Leave it alone. Cap and trade has become an election issue in Ontario, which is a shame. The program has been running for over a year now. It hasn’t damaged the economy or cost jobs, but it is starting to cut carbon and spurring a lowcarbon transition.
What is cap-and-trade? It’s essentially a system that limits the amount of carbon pollution allowed in Ontario. It helps to protect the environment and to protect people’s health at the same time, by helping Ontario to reach its greenhouse gas emission targets.
Under cap-and trade, industry and businesses that want to pollute need a permit, which they can get from the province. Fewer permits are issued each year, meaning the amount of pollution allowed in Ontario is reduced each year. The permits can be bought and sold and traded, and the trading is intended to allow the market to find the lowest cost reductions.
Cap-and-trade is a form of carbon pricing. It’s being called a tax by some, but it’s not. It’s been said by some that it will kill jobs, but it hasn’t and it won’t. We know this because we have evidence, which can be found in three recent reports: one from the Ecofiscal Commission, one from Canadian Centre for Policy Alternatives, and one from the Clean Economy Alliance.
Facts should matter. And the fact is, cap-and-trade is working in other jurisdictions, including California, Quebec, and the U.K. And it’s starting to work here, too.
Our report, from the Clean Economy Alliance, looks explicitly at Ontario. Among the findings: 2017, the first year of cap-and-trade, was a very strong year for Ontario’s economy. Ontario’s unemployment rate is at a six-year low, and is lower than the national average.
The claim that cap-and-trade or carbon pricing will kill jobs might be powerful rhetoric, but it’s not true. The province added more than 155,000 new jobs in 2017, the first year of cap-and-trade.
We won't have data on Ontario's 2017 carbon emissions for more than a year, but already the signs are very positive.
First, carbon emitters readily adapted to cap-and-trade, buying up virtually all of 2017 carbon permits put up for auction. The auctions were a stunning success and showed that the business community has literally bought into the program.
Second, there is already progress in reducing emissions. While natural gas use climbed in the rest of Canada, it shrank in Ontario, driven by reductions from industry. This was even before Ontario started its annual ratcheting down of its carbon cap in 2018, which suggests the price signal is already working.
It’s important to note that this reduced natural gas use is not because of reduced industrial activity. During 2017, manufacturing employment grew by 4.5 per cent while industrial natural gas use shrank by 15 per cent.
There are other signs of progress, too, including the fact sales of electric cars grew by 120 per cent during 2017, in part thanks to generous rebates made possible by the money raised by cap-andtrade. All told, the province raised $2.4 billion so far from the sale of permits from cap-and-trade, all of which must, by law, be reinvested into programs that reduce polluting emissions.
Cap-and-trade acts like a carrot and stick — the hard cap forces emissions down, while the money raised helps homeowners, colleges and universities, and industry reduce their emissions. It’s a powerful tool to drive a low-carbon transition.
Doing away with cap-and-trade won’t help the economy. Ontario’s economy is doing fine with it in place. And getting rid of it certainly won’t help the environment. Ontario’s industry has embraced cap-and-trade, so there’s no reason to change course. And then there’s the federal government, which will make sure every province has carbon pricing, one way or another.
Ontario’s cap-and-trade system is working, and there have been no negative impacts. It should stay in place and continue to do its work to reduce pollution in the province and help Ontario citizens transition to a low-carbon future.