Costs of Ontario climate plan would be double Liberal carbon tax, raise household costs: report

A growing pile of research argues economy-wide carbon taxes are cheaper to administer than regulations targeting specific sources of emissions

Nationalpost.com
June 5, 2019
Jesse Snyder

Ontario’s climate plan would cost taxpayers twice as much as the federal Liberal carbon tax, a new report says, casting doubt on policies proposed by a handful of provinces as they mount a legal objection to Ottawa’s environmental ambitions.

A report set to be released Tuesday by Canadians for Clean Prosperity, an environmental think-tank, found that Ontario’s climate change policies would be 59 per cent more costly for businesses and households in 2022 compared with Ottawa’s carbon tax. That figure would fall to 50 per cent more expensive by 2030.

The findings align with a growing pile of research that argues economy-wide carbon taxes are cheaper to administer than regulations targeting specific sources of emissions, which ultimately trickle down and raise costs for consumers.

The federal carbon tax, which came into force at the beginning of 2019, has become a source of intense political discord in Canada. Provincial leaders in Alberta, Saskatchewan, Manitoba, Ontario and New Brunswick have all opposed Justin Trudeau’s environmental policies. Ontario and Saskatchewan are involved in legal appeals as part of an effort to overturn the carbon tax, and the battle is widely expected to reach the Supreme Court.

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The Clean Prosperity report found that the cost of the Ontario plan would be more expensive largely because it would “cherry pick” certain sources of emissions to cut and would cost $334 million in 2022, or $62 per tonne of greenhouse gas emissions removed. The federal plan would cost $214 million in 2022, or $40 per tonne, according to the report.

Much of the additional costs would be passed down to consumers, the report said, raising annual household expenses in Ontario by an average $80 in 2022, rising to $154 in 2030.

Dave Sawyer and Seton Stiebert, researchers at EnviroEconomics who wrote the report, estimated the cost of the Ontario plan by adding up its many regulatory pieces. Those include a carbon tax on heavy emitters based on an Industry Performance Standard (IPS); a $400-million fund to help finance clean technologies; a plan to raise ethanol levels in gasoline to 15 per cent; and a policy aimed at boosting electric vehicle adoption.

The researchers said the Ontario plan effectively removes the economy-wide carbon tax, which raises the cost of gasoline and diesel at the pumps, while leaning on a tax on industrial emitters.

“Large emitters look to be overcompensated, on average, by $298 million in 2022 and $78 million in 2030” even as they pass costs down to the consumer, they said.

The federal carbon tax is made up of an economy-wide tax on gasoline and diesel, and a tax on emissions from heavy emitters.

The Clean Prosperity researchers recommend that Ontario could reduce the cost of its plan by extending its IPS system to distributors of gasoline and diesel, which would effectively raise costs of the fuels closer to the source, rather than at the pump.

Critics of the Ontario policy have also pointed out that Premier Doug Ford’s plan to raise the portion of ethanol in gasoline to 15 per cent, up from a 10 per cent blend, also threatens to raise pump prices by weakening the energy output of gasoline.

Ottawa has rejected Ontario’s climate plan, saying it fails to sufficiently account for economy-wide emissions.

Ontario and other provinces have argued that they should be allowed to cut emissions through whatever policies they see fit, rather than being forced by Ottawa to introduce a specific carbon tax.

Voters in some provinces, particularly in Alberta, have loudly opposed an economy-wide tax but have largely accepted the tax on heavy emitters.

Alberta introduced a carbon tax on heavy emitters in 2007 under the Progressive Conservative government, which was set at $15 per tonne. The New Democratic Party then expanded it in 2016 to include an economy-wide tax, starting at $20 per tonne, and initially slated to rise $10 every year thereafter. Alberta Premier Jason Kenney scrapped that plan altogether as his first policy after taking office in April.

Economists say economy-wide taxes are the most efficient way to lower greenhouse gas emissions. About 80 per cent of all oil-related carbon emissions come from the transportation sector, according to the International Energy Agency, which includes the driving of cars, trucks and SUVs.

Critics of the Liberal carbon tax are quick to point out that Canada accounts for only a small sliver of global emissions. Even by its own admission, Ottawa is set to miss its Paris climate targets under current policies, and would need to sharply raise carbon taxes or introduce new measures to meet those thresholds.