Ford and the Future of Carbon Pricing in Ontario: Part I

(Photo: Mark Blinch)

It was announced on June 15th by Premier-designate Doug Ford that his first act in office as the Premier of Ontario will be to cancel the province’s cap-and-trade scheme. To boot, Ford plans to go one step further by challenging the federal government in its mission to impose a carbon tax on all provinces that do not implement their own carbon pricing plan. This news comes as part of Ford’s promise to “take immediate action to…bring [Ontarians’] gas prices down”. 

The merits of carbon pricing are apparent to those that believe that human-caused climate change is a reality that has to be dealt with as soon as possible. Carbon pricing allows for price signals to be sent to consumers and emitters so that they can recognize the extent to which they expel greenhouse gases into the atmosphere and reduce their emissions accordingly. In the wake of climate change accords and conferences, such as the famous 2015 Paris Accord, scientific and public communities across the globe have begun to accept that climate change is a growing threat to the planet that deserves our immediate attention. 

With the incoming Premier determined to put an end to carbon pricing in the province, the question must be asked if there is perhaps a better way to fight climate change without the cap-and-trade program. Is cap-and-trade the best method of encouraging Ontario businesses and citizens to minimize their carbon footprint, or is it the federally-mandated backstop? Or, could carbon pricing damage Ontario’s economy more than it would improve the environment? 

Here we give a general overview of the present situation and outline the alternatives that exist for Ontario’s future in carbon pricing. Presently, Ontario has a cap-and-trade system. If that were to be abolished, the province would still be subjected to the federal carbon price backstop in the form of a carbon tax. However, if Ford is successful in fending off Prime Minister Trudeau’s government, then our province will be left with no carbon price at all. This article is the first in a two-part series. Below you can read a little more about the three options that were just outlined. In the second article, you will get to read about the pros and cons associated with each option – as tough as it is to believe, there are advantages and disadvantages for each one!

 Jim Cole

(Photo: Jim Cole)

The Cap-and-Trade

The currently in-place carbon pricing scheme for Ontario is a cap-and-trade system that is joined with the Quebec and California carbon markets. This system sets a cap on the amount of allowable emissions of carbon dioxide in the market and allocates carbon credits to industry which can be purchased at auction and whose prices are set by their demand. These credits can then be traded between businesses as they approach the emissions cap. 

The Carbon Tax

Prime Minister Trudeau made it clear in his platform in the 2015 federal election that action to reduce nationwide greenhouse gas emissions was a primary focus of his. One of his steps to combat climate change was to set up the federal carbon price backstop, which is a $50/ton tax on carbon dioxide emissions. The concept is pretty simple to grasp: an entity emits x tons of carbon dioxide equivalent per year, that entity is charged $50x per year for those emissions. However, a host of pros and cons have been identified with this scheme, which has lead to backlash from the likes of Alberta, Saskatchewan, and now Premier-elect Doug Ford.

No Carbon Price

If Ford is successful in eliminating the cap-and-trade program, then he will still have to deal with resisting the federally-mandated carbon tax. But, if he gets his way on that front as well, then Ontario will be left with no carbon pricing scheme to speak of. Getting rid of carbon pricing altogether would mean that Ontario businesses who are heavy greenhouse gas emitters would be able to return to business as usual. Although this may seem like an environmental loss for the province, the reality exists that this could come to pass, so the ramifications of no carbon price warrant a closer look.

This wraps up the first part of this article. Keep an eye out for part two where we will expand on the carbon pricing options that are available to Ontario and how these could affect the future of our province.

This is the first entry of a blog mini-series on Green Energy by Cristian Hurtado, Research Assistant at Sierra Club Ontario.

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