Do your eyes glaze over when you see the words "cap and trade"? Mine do. Cap and trade is a fancy scheme for cutting greenhouse gasses. It's so fancy that only the experts understand it.
That's fine with the ruling party in Ontario. If ordinary people understood what was going on, they'd rise up and march on Queen's Park with pitchforks.
So here's a brief explainer to clear things up.
Why should we care about this now?
Last week, Ontario, Quebec and California – three of the most righteous climate-change jurisdictions in the world – signed a new cap-and-trade deal that will come into effect on Jan. 1. Watch out. This is going to cost you.
What's the difference between cap and trade and a carbon tax?
At their best, carbon taxes are simple, transparent and revenue-neutral. The government taxes carbon emissions, then rebates the money to taxpayers. Businesses and consumers are incentivized to cut down on emissions in whatever ways work best for them.
Cap and trade is a lot more complicated. It requires companies to buy so-called "permits to pollute" that are auctioned off by the government. It is neither simple, transparent nor revenue-neutral. In Ontario, it will raise billions in new revenue for the government to spend as it sees fit. In other words, it is a way for activist governments to dispense free allowances to certain industries, shower money on their favourite projects and generally meddle in the economy. In California, cap-and-trade money is being used to finance Governor Jerry Brown's notoriously expensive high-speed train to nowhere. No wonder the government of Kathleen Wynne loves it!
How much will it cost consumers?
The direct cost to consumers will be 4.3 cents a litre at the pump and around another $156 in home heating costs (rising to $210 in 2019), the government says. Extra indirect costs on goods and services might be another $75 a year. Critics argue that costs will be much higher as the costs of cap and trade on distributors are fully passed on to ratepayers.
That doesn't sound so bad. So how much will government raise, and where will the money go?
So far this year, the government has raised about $1.5-billion from the sale of cap-and-trade allowances. By 2020, it will raise $8-billion. The bulk of this money will go to a laundry list of emissions-reduction initiatives. These include schemes to increase the use of biogas, build regional transit, reduce the price of electricity, increase the use of green vehicles, improve energy efficiency in social housing, create a new government agency to help businesses adopt low-carbon technologies, conduct home energy audits and get people to walk and cycle more. There is also a vague promise to "collaborate with indigenous communities." The opportunities for new bureaucracies, consultants, advisers and boondoggles will be endless.
Will these initiatives actually achieve the government's emissions target for 2020?
No. The 2020 target is 15 per cent below 1990 levels. The auditor-general says that cap and trade will probably deliver less than one-fifth of the required reductions. On top of that, over the next three years, as much as $466-million will leave the Ontario economy – because it will be cheaper for businesses to buy allowances from Quebec and California than it will be to reduce emissions. The amount flowing out of the province could reach $2.2-billion by 2030.
Will the extra cost of cap and trade be broken out on your gas bill?
Of course not. If it was, people might get angry.
How well do cap-and-trade systems work?
In theory, they can work well. In reality, there's too much room for political manoeuvring and interference. How are the caps set for each industry? Who gets a break (for competitive reasons), and who does not? Administration is expensive. Higher costs for gas and fuel hammer the worst off. Worst of all, the Wynne government has no intention of putting the money it's raising back into people's bank accounts. Instead, the money will go into its pet projects du jour. It's also hard to see why we should siphon hundreds of millions of dollars to California, which is way richer than we are.
It certainly does seem like a lot of money for a negligible reduction in emissions.