Ontario business groups want cap-and-trade program delayed

The climate change plan comes into effect Jan. 1 in Ontario and will impact businesses, homeowners and drivers alike.

Thestar.com
Dec. 29, 2017
By Kristin Rushowy

Ontario’s cap-and-trade program begins Jan. 1, but businesses are already asking the government to delay it for a year.

Twenty chambers of commerce around the province - including those in Ajax-Pickering, Burlington, Hamilton and Newmarket - have banded together, issuing a last-minute warning that the climate change-fighting plan will cost homeowners more and put stress on businesses already reeling from higher hydro costs. They are also worried about the impact on future investment here.

“Ontario businesses are already losing jobs to neighbouring jurisdictions, and we’ve seen a lot of capital and job flight to jurisdictions in neighbouring areas,” said Nathan MacDonald, policy and communications manager for the Ajax-Pickering Board of Trade.

And given U.S. president-elect Donald Trump’s comments that he wants to back of out the Paris climate change agreement, “it doesn’t look like a good time to add a tax on most production in the province” when other areas will be cheaper, he added.

Environment Minister Glen Murray said the province’s Climate Change Action Plan has broad support from business and “will reduce greenhouse gas pollution at the lowest possible cost to families and businesses.

“Third-party economic experts have confirmed that our plan is both the most cost effective and best at reducing emissions compared to directly to a carbon tax.”

He noted the Ontario Energy Board recently announced that “natural gas prices will remain lower in 2017 than they have been during recent peak periods - even when factoring in the cost of cap and trade.”

The cap-and-trade system provides large greenhouse gas polluters, such as natural gas company Enbridge, with permits or allowances, based on past usage, that decrease over time with a target of shrinking emissions overall.

Companies that don’t use all of their allowances can sell off leftovers, and if they need more, extras can be purchased at quarterly auctions.

The plan is for Ontario to link its cap-and-trade system with one already operating between Quebec and California by 2018, which Murray has said is the most affordable option for businesses and one that guarantees reductions.

It is expected to reduce emissions by 3.8 megatonnes out of a total target of 18.7 megatonnes by 2020 - an amount that was recently criticized by the province’s auditor general. However, the government said 9.8 megatonnes of reductions will happen as a result of other initiatives.

It must use the annual $1.9 billion the program is expected to bring in yearly to fund greenhouse-gas fighting programs.

Homeowners will see heating bills rise by about $5 to $7 a month, and gasoline costs about $8 a month.

For businesses, the chambers of commerce say members are already “feeling the squeeze” of higher electricity prices, and argue the government has no idea what the impact the cap and trade costs will have on individual sectors.

Extra charges on natural gas, gasoline and diesel fuel “will be keenly felt by every individual and business in Ontario,” their statement says.

Denise Jones, president of the Ajax-Pickering Board of Trade, said she worries of the “unintended impact” of cap and trade may be the “removal of jobs and investment from clean grids in Ontario to much dirtier grids in the U.S. and elsewhere.”

Ontario’s auditor general has said cap and trade will cost Ontario businesses and consumers $8 billion more by 2020, although the government has said it’s too soon to say.

Overall, cap and trade is forecast to have little impact on the province’s GDP.

“The Climate Change Action Plan will invest the proceeds of cap and trade in projects that will reduce greenhouse gas emissions, create good jobs in clean tech and construction, generate opportunities in investment in Ontario, and help people and businesses transition to a low-carbon economy,” Murray said in a written statement to the Star.

“Ontario’s business community throughout the consultation and implementation processes have shown support for our plan to fight climate change because directly compared to the alternatives, it is best suited spur economic growth and achieve real emissions reductions at the lowest cost.”

WHAT IS CAP AND TRADE?

Ontario plans to join Quebec and California in a cap-and-trade system to put a price on carbon to help reduce the greenhouse gas emissions that contribute to climate change.
Under the plan, industries have emission limits - or caps. Those who pollute less can sell - or trade - credits. Over time, an industry’s overall cap will be lowered in order to slash emissions, creating an economic incentive to lower them.

Proponents believe the rising cost of operating carbon-intensive businesses will spur clean technology innovation.

Overall, the government expects to bring in $1.9 billion a year in new revenue to curb climate change and by law all of that must be spent on environmental initiatives like promoting conservation and use of electric cars.

For households, the impact is expected to be about $13 a month through higher heating and gasoline costs.