Greenhouse gas plan will cost consumers

‘That’s the whole point. That’s how you get people to shift toward consuming things that have a lower carbon intensity’, economist says.

Thestar.com
April 13, 2015
By Dana Flavelle

Ontario consumers will likely pay more for home heating and fuel, including an extra 2.5 to 3 cents a litre for gasoline, under the province’s plan to cut greenhouse gas emissions.

But it’s a small price to pay to combat climate change, supporters say.

Premier Kathleen Wynne announced Monday the province would introduce a “cap-and-trade” system of carbon pricing on greenhouse gas emitters.

Few of the details have been worked out. But one thing seems certain: The added costs to businesses will be passed down to consumers.

“That’s the whole point. That’s how you get people to shift toward consuming things that have a lower carbon intensity, from the vehicle we drive to the way we heat our homes,” said Glen Hodgson, chief economist with the Conference Board of Canada, an Ottawa think tank supported by business leaders.

The province would be the third jurisdiction in North America, after California and Quebec, to move toward a cap-and-trade system.

Unlike a carbon tax, which puts a price on every tonne of greenhouse gas emissions, cap-and-trade limits emissions but allows companies to buy permits to meet their needs and also trade the permits.

The system will “protect the air we breathe, the water we drink and the health of our children and grandchildren,” Wynne told a press conference.

She also acknowledged it could lead to higher prices at the gasoline pumps.

Ontario’s announcement is “a big step forward,” said Chris Ragan, chair of Canada’s Ecofiscal Commission and an associate professor of economics at McGill University.

The commission has recommended provinces move forward with their own carbon pricing plans, rather than wait for the federal government.

The biggest greenhouse gas emitters in Ontario - by sector - are transportation, industry and buildings, according to a report the province released in February.

The impact on industry will depend on how the program is designed, several business organizations said.

It’s unclear how much the program will cost because it hasn’t yet been designed. In Quebec, carbon permits currently trade for just over $12 a tonne.

“Products that are particularly intensive in their carbon emissions are going to go up (in price.) Other products aren’t going to go up at all in price,” Ragan said.

The province said Monday it would reinvest the money in projects that reduce greenhouse gas pollution and help businesses remain competitive. That could include helping families buy more energy efficient appliances, building more public transit and helping factories reduce their emissions.

California returns some revenues to citizens in the form of energy credits.

Quebec places the revenue into a Green Fund for new technologies and public transit.

Winners and losers

Ontario Trucking Association - As consumers of fuel, truckers are facing potential cost increases under carbon pricing plan. But they’re also hoping the province will use some of the proceeds from the program to help offset the cost of switching to more fuel efficient vehicles, association president David Bradley said.

“It’s in our interest to become more fuel efficient,” Bradley said. “These things can work provided they are set up properly and the funds don’t just go into general revenues.”

Canadian Manufacturers and Exporters - Its members are also big consumers of fuel and thus likely to face higher costs. But they’re also hoping the government will use some of the revenues to help them buy more energy efficient machinery and equipment.

“If we do it right, we can do something really good for the environment and really good for industry,” said Jay Myers, president and chief executive officer of the manufacturers’ group.

Otherwise, it will be “just another tax that makes it more expensive to do business in Ontario” Myers said.

General Motors Canada - The program could help if the proceeds are used to help consumers move to more energy efficient vehicles sooner, said David Paterson, vice-president, corporate and environmental affairs.

“GM believes there can be opportunities in addressing climate change and that we need to go on with that and do it,” Paterson said.

Ontario could use the revenues to promote faster adoption of electric vehicles by subsidizing workplace charging stations, for example.

Companies in “trade sensitive” industries could be given a break on carbon pricing to ensure they’re not at a cost disadvantage to competitors outside Ontario, he added.

Ontario’s biggest greenhouse gas emitters

Transportation - 34 per cent

Industry - 30 per cent

Building - 17 per cent

Electricity - 9 per cent

Agriculture - 6 per cent

Waste - 4 per cent