Ontario adopts cap-and-trade system to reduce greenhouse gases

Ontario will adopt a cap-and-trade system to reduce greenhouse gas emissions, Premier Kathleen Wynne said Monday before she travelled to Quebec to sign a deal with that province.

Wynne offered scant details on how the system would work and said specifics will come later.

"It would be irresponsible of us to speculate on exactly what the costs are going to be when we haven't worked to design the mechanism yet," she said in Toronto.

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That will come in the next six months, she added.

Her announcement comes seven years after Ontario first signed onto the Western Climate Initiative with Quebec and California.

Estimates from Quebec and California peg the increased cost on the price of gasoline to be between two and 3.5 cents which Wynne characterized as "small" potential increases. Climate change is already imposing costs on society, damaging crops and increasing insurance claims, she said.

Under a cap-and-trade system, businesses will have a greenhouse gas quota and be able to sell credits to reward efficiency and innovation, Wynne said. Companies that want to burn more fossil fuels can buy carbon credits from those that burn less than they are allowed. Money raised through the system will be reinvested in green technology and green infrastructure, the premier said.

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Ontario's Progressive Conservatives are skeptical that funds from what they're calling a "tax on everything" will just be diverted to general revenues in a province struggling to eliminate a $10.9-billion deficit.

Right now companies are allowed to spew pollutants into the atmosphere for free, but everyone is paying the costs, Wynne said.

"Call it carbon pricing, cap and trade, a market mechanism or I believe it's misleading but if you must, go ahead and call it a tax," she said. "Most of us will not be fooled because for most of us the label is not important. What's important is that we make progress."

The Ontario NDP supports the idea of carbon pricing, but critic Peter Tabuns said for the cap-and-trade announcement to be made with no policy or numbers is "bizarre."

Environmental groups applauded Ontario's announcement, but said the program must contribute "meaningfully" toward the province's target of reducing emissions 15 per cent below 1990 levels by 2020.

The Green Party of Ontario leader said for cap and trade to work, the Liberal government must not allow special industry exemptions, which Mike Schreiner said are weakening the effectiveness of Quebec's system.

"Exemptions undermine our climate obligations and create unnecessary economic distortions," he said in a statement. "We can't let the Liberals turn cap and trade into cap in hand."

Ontario's announcement means 75 per cent of Canadians will now live in a province with some form of carbon pricing, Wynne said.

British Columbia has a carbon tax that includes a seven-cent-a-litre levy on gasoline. Alberta's version of carbon
pricing targets large industrial emitters, requiring them to reduce their carbon intensity by 12 per cent relative to their baseline level.

The federal Conservative government opposes carbon pricing, calling a proposed federal Liberal plan a job-killing tax, but says it will not dictate provincial policies.

"Our government will continue to implement a responsible sector-by-sector regulatory approach that is aligned with our major economic competitors like the United States to ensure Canada's economic competitiveness is protected," a spokesman for Environment Minister Leona Aglukkaq said in a statement.

Aglukkaq sent letters to her provincial and territorial counterparts last week, urging them to send more information to
bolster reduction targets that Ottawa has so far only estimated based on 2014 information.

Ontario has been critical of Ottawa's approach, saying Canada needs a federal government that is willing to work with provinces and territories, not simply providing a tally of provincial initiatives.

Wynne will attend a climate change summit in Quebec City on Tuesday with most of the other premiers and territorial leaders.