Ontario Premier Kathleen Wynne is preparing to bring in a cap-and-trade system for greenhouse gas emissions, an ambitious move that could amount to the nation's single largest salvo in the battle against global warming.
The new system would be linked with Quebec and California's current cap-and-trade program, government and industry sources said, creating a carbon market of 61 million people and covering more than 60 per cent of Canada's population.
Ontario Environment Minister Glen Murray is expected to present the plan to cabinet for approval within the next 10 days. It is believed to have widespread support among ministers already, one source said. The broad outlines of the system will be announced some time this spring – possibly around an interprovincial climate summit in Quebec City on April 13 – with full details worked out over the coming months.
Under a cap-and-trade system, the government caps the amount of carbon that can be burnt, and raises money by auctioning off permits to companies that plan to create greenhouse-gas emissions. Companies that want to burn more than their share must buy permits from other companies that have burned less. By comparison, a carbon tax, such as the one in force in British Columbia, simply puts a price on every tonne of carbon burned, and the cost motivates industry and consumers to curb their emissions.
Cap-and-trade could raise between $1-billion to $2-billion per year, depending on the price of carbon credits, the sources said. This would likely be plowed back into green programs, such as public transit or energy conservation retrofitting.
Ontario's sheer size means its move toward carbon pricing has the potential to do more than any other program in Canada to slash emissions. The province's selection of cap-and-trade will also make it the dominant carbon-pricing system in the country, covering more than half of the nation's economic output.
The choice of cap-and-trade over a simpler carbon tax is the result of a series of political and policy calculations for the government, the sources said. It allows the governing Liberals to keep the word "tax" out of the system's name and, as the favoured policy of the NDP, could win support on the political left. It also allows government to set a hard cap on emissions – something that may prove necessary if the province is to meet its goal of cutting emissions to 15 per cent below 1990 levels in five years. Ms. Wynne's chummy relationship with Quebec Premier Philippe Couillard is also believed to have pushed the province toward the policy.
But cap-and-trade is also thought to be more prone to manipulation by special interests than a carbon tax. Caps are expected to be set industry-by-industry, sources said, which opens the possibility of some sectors negotiating more lenient targets than others.
The policy has been a long time coming. The province agreed to price carbon when it signed the Western Climate Initiative with Quebec, B.C. and California in 2008. The following year, the Liberals passed enabling legislation for a cap-and-trade system. But the province never moved forward, first because it was skittish about implementing a carbon price during the recession, and later because a fractious hung parliament made it difficult to get any major programs passed.
Ontario achieved a massive reduction in greenhouse-gas emissions by closing all of its coal-fired power plants last year, slashing emissions to 6 per cent below 1990 levels. But last summer, Environment Commissioner Gord Miller warned the province would miss its 2020 target – 15 per cent below 1990 levels – without further action.
After winning a legislative majority last year, Ms. Wynne decided to move forward. She put Mr. Murray in charge of the file and vowed to "put a price on carbon," but said her government had not decided whether it would be cap-and-trade or a carbon tax. Mr. Murray has been working closely with his Quebec counterpart, David Heurtel, and has organized an international climate change meeting for Toronto in July.
B.C. brought in its tax in 2008, while Quebec implemented cap-and-trade system in 2013, and subsequently linked it to California.
A wide range of influential Canadians – from Preston Manning to Naomi Klein – have been beating the drum for carbon pricing. And just this week, a group of Ontario business leaders, including executives with Hewlett-Packard and Desjardins Group, signed a letter urging the province to move forward with a plan.