Ontario projecting less cap-and-trade money

Yorkregion.com
May 1, 2017

Ontario is lowering its projections for how much money its cap-and-trade program will bring in this year and next to allow for market fluctuations.

The Liberal government estimated in last year's budget that the program would bring in $1.9 billion per year, but this year's budget projected $1.8 billion for this fiscal year, and $1.4 billion annually starting in 2018-19.

The system aimed at lowering greenhouse gas emissions puts caps on the amount of pollution companies in certain industries can emit and if they exceed those limits, they must buy allowances at auction or from other companies that come in under their limits.

Environment Minister Glen Murray said the $1.9 billion represented the revenue from the program if every auction was sold out, but the government is now budgeting for an 80-per-cent average of allowances sold at the auctions.

"It's a bit of a fool's game, but you have to put a number in the budget," Murray said Monday.

"In four or five years we'll have a better idea of what the norms are and what factors drive it...Right now they are, I think, relatively prudent projections, but I wouldn't bank anything on it."

The government has also learned that sales of allowances meant for future years must be counted in those years, Murray said. In Ontario's first cap-and-trade auction in March, three per cent of the 26 million allowances sold were for the year 2020, so those proceeds can't be counted in 2017-18.

The province's budget watchdog previously raised questions about the $1.9 billion figure, saying it's too difficult to forecast those revenues with any precision. The Financial Accountability Office warned that cap-and-trade money could be used to boost the province's overall budget, if it went to previously planned programs. If there is new revenue but no new expenses, it would reduce a deficit or increase a surplus, the office said.

Ontario's four-year climate change action plan is funded by cap-and-trade revenues and has planned for a range of between $5.9 billion and $8.3 billion. The money is set to go to green initiatives such as social housing retrofits, an electric vehicle incentive program and public transit.

Lower revenue wouldn't mean any of those programs would be cancelled, it would just mean a bit less money for each, Murray said.