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Politics Scrapping cap-and-trade will cost Ontario $3-billion in lost revenue: financial watchdog

Ontario’s financial watchdog says the Ford government’s decision to cancel the province’s cap-and-trade system will lead to a loss of $3-billion in revenue over the next four years.

Financial Accountability Officer Peter Weltman said in a report released Tuesday that the loss of revenue exceeds savings from cancelling spending programs.

“By cancelling cap-and-trade, the province’s annual budget balance will worsen by a cumulative total of $3-billion over the next four years,” Mr. Weltman told reporters at Queen’s Park.

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The news comes after Ontario Premier Doug Ford’s Progressive Conservative government increased its deficit estimate to $15-billion for the current fiscal year last month, up from $11.7-billion predicted by the province’s Auditor-General in May.

Ontario Environment Minister Rod Phillips said Tuesday the cap-and-trade program was “not effective” and the government would rather see money in families’ pockets. “This was a tax that was bad for Ontarians,” he said. “$3-billion less for the government means $3-billion more for families.”

Ontario Finance Minister Vic Fedeli said his government “makes no apologies for bringing relief to families," including an estimated $264 per household next year, according to cap-and-trade figures in the Financial Accountability Officer’s report. When asked if the province will be cancelling more programs, Mr. Fedeli said the government’s finances will be revealed in the upcoming fall economic statement.

Peter Tabuns, NDP’s energy and climate change critic, said he fears the Ford government will have to make cuts to services.

“The biggest expenses we have in our budget are health care and education – I think that’s where they’re going to go,” he said.

To fulfill a campaign promise, Mr. Ford introduced a bill in July to end the cap-and-trade program and has also vowed to challenge the imposition of a federal carbon tax in court. Barring a successful legal challenge of the federal tax, the Ford government and other non-compliant provinces will be subject to a federal pricing backstop beginning next year.

Cap-and-trade, which was introduced by the former Liberal provincial government, puts caps on the amount of pollution companies in certain industries can emit. If they exceed those limits, they must buy allowances at auction or from other companies that come in under their limits.

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The Financial Accountability Officer’s report also found that the federal Liberal government’s carbon-pricing plan will impose higher costs than the cap-and-trade system beginning in 2020, although it’s not yet known how federal revenues would be returned to the province.

The report estimates that households will pay up to $648 per year under the federal plan by 2022, compared to $312 under cap-and-trade. However, Mr. Weltman said that if the federal government returns the money directly to the public, it’s possible about 80 per cent of Ontario households would actually end up paying less in taxes than under cap-and-trade.

Ottawa has pledged to impose a carbon tax on provinces, beginning next year, if they do not come up with their own pricing scheme for reducing emissions. The federal government will reveal in the coming weeks the details of how it will recycle the revenue, said Vincent Hughes, a spokesman for Intergovernmental Affairs Minister Dominic LeBlanc.

Mr. Phillips questioned how the Trudeau government’s plan could save taxpayers’ money. “When a government says that a tax is going to put more money in your pockets, most of us are skeptical about that,” he said.

In the House of Commons on Tuesday, Conservative MP Pierre Poilievre argued the Liberals are burdening households with a carbon tax, but letting the industry off easy by only taxing a small portion of industrial emissions. The government adopted that approach to ensure industry does not move investment and jobs out of the country while still providing some incentive for the companies to cut their emissions.

“Large industrial polluters get off scot-free while the average Canadians household has to pay more,” Mr. Poilievre said.

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Federal Environment Minister Catherine McKenna said Canada is already seeing the impacts of climate change in terms of Arctic melting, droughts and flooding which are expected to get far worse as global average temperatures increase.

“There is a cost to pollution but we have always said we will give money back – give more money in the pockets of people who live in a province where the tax is collected,” she said.

With a report from The Canadian Press

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