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Globe editorial: Ontario says it will cut emissions without a carbon tax. But how?

Ontario’s new Progressive Conservative government kept a key election promise on Wednesday when it introduced legislation to kill the province’s cap-and-trade carbon-reduction program. It’s not clear yet when the bill will be passed or how much it will cost, but the point is that Ontario is getting out of the carbon-pricing business.

At the same time, Environment Minister Rod Phillips says the government will set targets for the reduction of greenhouse gas (GHG) emissions and report on the progress it makes. He hasn’t said what mechanisms Ontario will use to lower emissions but, having rejected direct carbon pricing, that basically leaves regulations and subsidies as options.

So what will that mean for Ontarians? Based on the government’s actions to date, it won’t mean subsidies for purchasing electric or hydrogen-powered cars, or rebates for making homes and businesses more energy efficient, or investments in renewable resources such as wind and solar. All of those things exist in Ontario but were funded by the revenues from the doomed cap-and-trade scheme, and the government is cancelling them as a consequence.

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The government could instead set sector-specific emission caps for industrial polluters and fine them when they go over their limits. But that is, in essence, what cap-and-trade did, so it would make little sense to recreate a price on carbon in the form of a financial penalty.

It could reduce GHG emissions by obliging polluters to invest in carbon-capture technology, but not without adding to the polluters’ costs, which is a hard sell for a government that insists Ontario is “open for business.” The government could help offset those costs by providing subsidies to affected businesses, but the lack of a dedicated source of revenue for that sort of thing – from, say, a carbon-pricing scheme – will make it hard to find the money without cutting other programs or raising taxes.

It could require that a rising percentage of transportation vehicles – semi-trailer trucks, ships, airplanes, trains, delivery vans – run on diesel, biofuels or renewable energy. But there again, subsidies would likely be required to ease the costs for those affected during the transition to a lower GHG world, and where would the government find the money?

The government could raise the price of fuel through taxation as a mechanism for lowering consumption and encouraging a shift to renewables. But since it has announced it is going to lower gasoline taxes and will also eliminate the 4.3-cent surcharge on gasoline that came as a result of cap-and-trade, it’s clear that this isn’t going to be an option.

It could require that car companies sell an ever-increasing percentage of electric, hybrid or hydrogen-powered vehicles, but why would consumers buy them if the price of gas remains low?

It could shut down all the coal-fired energy plants in Ontario, but that was done four years ago by the previous Liberal government.

It could subsidize the development of new technologies for capturing GHG emissions and improving renewable-energy production. That’s not a bad idea but, again, where would the PC government, so dedicated to cutting costs, find the money for such a thing?

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There are no easy answers. And anything the Ontario government does to lower GHG emissions will be further complicated by the fact that there is a high likelihood Ontarians will be hit with a carbon tax imposed by Ottawa.

Ontario has joined Saskatchewan’s legal challenge to the federal government legislation that imposes a carbon-pricing regime on provinces that fail to implement one of their own by the end of this year. But that challenge may well fail, which means Ottawa could be collecting a carbon tax in Ontario in the new year.

Luckily, though, the Trudeau government says it will return the revenues it collects to the province, either directly to households or to provincial coffers. Which means Ontario’s PC government may well have a source of revenue for the subsidies and other expenses related to defraying the costs of imposing the regulations that will be necessary for lowering GHG emissions.

That’s actually a brilliant idea: a price on carbon that lowers fossil-fuel consumption and encourages efficiencies, while also raising money that can either be given back to taxpayers or used to further lower GHG emissions. If only someone had thought of it sooner.

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