Tories talk compensation for scrapping cap-and-trade program

Ontario’s new Progressive Conservative government expects to spend up to $5 million to compensate companies that bought into the province’s capand-trade system, the provincial environment minister said Wednesday before moving to repeal the carbon pricing program. Rod Phillips introduced a bill that, if passed, will lay out the legal framework to wind down cap and trade, as well as the criteria for companies seeking to be reimbursed for costs incurred through the program.

While the program’s 272 participants bought close to $3 billion in allowances, Phillips said only those that purchased more than they used while the program was still active, and were not able to recover those costs from consumers, will be eligible for compensation. The proposed legislation would also protect the province from any potential litigation over the decision, the government said. Critics were quick to call the move disruptive for business, saying it will likely be challenged in court despite the immunity built into the bill. But Phillips said he believes it will be well received and called it “a very fair framework around compensation.” The cap-and-trade system aims to lower greenhouse gas emissions by putting caps on the amount of pollution companies in certain industries can emit. If they exceed those limits, they must buy allowances at quarterly auctions or from other companies that come in under their limits. The Tory government has already taken steps to unravel the program, including revoking the regulation that lays out its operation. That has led to the cancellation of a number of green initiatives that were funded through cap-and-trade revenues. Opposition parties had expressed concerns that the government could be on the hook for billions of dollars to compensate permit holders, and that the Tories have yet to explain how they will make up for the lost revenue. Ontario’s fiscal watchdog said Tuesday it will look into how much the cancellation of cap and trade will end up costing the province.