Ontario’s commitment to a price on Carbon

The Ontario Government is now weighing responses received from its public consultation on climate change. There will be many developments in both law and policy as a result of this consultation.

One development is certain:  Ontario will establish a price on carbon as a mechanism to reduce Green House Gas emissions in the Province.  Ontario is taking this step as it is clear that the present Federal Government will not set a price on carbon  – or take any significant nation-wide initiative to reduce GHG emissions.

The two main ways of setting a price on carbon are:  a carbon tax or a system of cap-and-trade.  These methods were the subject of our Climate Change Forum “Putting a Price on Carbon” and have been the subject of comment in 4RG blogs.

Our expectation: Ontario will establish a cap-and-trade regime by joining an existing system to which Quebec, California and British Columbia are now parties.

Cap-and-Trade

At the Federal level, both the NDP and Green Parties support cap-and-trade. A full Canada-wide system will take some years to establish. Initially the best Federal action would probably be endorsement of the existing cap-and-trade system in which Quebec and British Columbia now participate and Ontario will soon join. A Federal Government could enhance this system in Canada by legislating desirable features beyond the constitutional jurisdiction of the Provinces, such as a provision to discourage emitting industries from abandoning one jurisdiction for another that does not have cap-and-trade.

If the Liberals form the next Federal government, Justin Trudeau has stated that within 90 days of taking office he would meet with Provincial and Territorial leaders to hammer out a national carbon pricing plan.  Under this plan Ottawa would set targets and establish principles, but Provinces would be allowed to design their own systems consistent with these principles.  Mr. Trudeau’s platform sounds like a cap-and-trade system.

Carbon Tax

BC has successfully established a revenue neutral carbon tax that applies to the consumption of all fossil fuels (not just gasoline). 4RG considers that a Carbon Tax is inevitable. Reducing consumption of fossil fuels must be a civic responsibility of all Canadians, and if they are not disposed to accept this responsibility now, a carbon tax could channel their involuntary participation. Given the criticism of the Federal Conservatives (remember the slogan “Job killing carbon tax!”) 4RG understands that such a tax has too many negative political implications just now.

Federal Government involvement

Public opinion polls show that a large majority of Canadians expect the Federal Government to put a price on carbon, although the Federal Government has not shown any willingness to do so.  Assuming the election of a Federal Government committed to putting a price on carbon, all Provinces and Territories should work towards an agreement as to the method to be used.

We have previously commented on the Federal contribution to a cap-and-trade system. If the choice is a carbon tax, there would be desirable to have agreement as to the level of tax, the use of funds raised by the tax, and the increase of the level of the tax over subsequent years.

The Federal presence would also encourage uniform tax laws throughout the Provinces.  An approach supported by the Federal Government has the further advantage of building a positive image of Canada on the international scene.

Keeping your fingers crossed as . . .

To the extent possible 4RG has been non-partisan in pushing for government action on climate change.  At this point we recognize that if the Conservative Party is re-elected, Federal support of any carbon pricing is a pipe dream. Worse, a Conservative Government is heavily committed to the consumption of fossil fuels and will resist any movement towards a carbon-free economy, depriving Canada of the benefits of a strong renewable energy industry.

We have to work hard to avoid that result.

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