Premier Doug Ford’s move to scrap Ontario’s cap-and-trade alliance with Quebec and California will deal a $3-billion blow to the treasury, according to the province’s financial accountability officer.
“By cancelling the cap-and-trade program, the province’s annual budget balance will worsen by a cumulative total of $3 billion over the next four years,” Peter Weltman warned Tuesday.
“The province’s budget balance worsens because the loss of cap-and-trade revenue from ending the auction of emission allowances is greater than the savings achieved from cancelling cap-and-trade-related spending programs,” said Weltman.
Environment Minister Rod Phillips, who will unveil a replacement climate-change plan later this year without any taxation component, insisted the $3 billion hit was anticipated.
“That’s $3 billion back in the pockets of Ontario taxpayers,” said Phillips.
“We committed to the orderly wind-down of this program that was killing jobs, that was regressive, and we will follow that through. It’s a promise we made, it’s a promise we’ll keep,” he said.
“Yes, that means less money for government — that’s more money for families.”
NDP MPP Peter Tabuns (Toronto Danforth) countered that “Ford is hurting Ontario’s environment, and he’s charging all Ontarians extra to do it.”
“The direct result of Ford’s favour to big polluters will be $3 billion in costs piled onto the backs of the people of Ontario. That means ripping $3 billion right out of folks’ bank accounts, or cutting $3 billion from things like health care,” said Tabuns.
Green Leader Mike Schreiner said “Ford’s anti-climate agenda is bad for the environment and bad for business.”
“Today we learned that the premier’s reckless actions are a $3 billion boondoggle that will dig a deeper fiscal hole for the province,” said Schreiner.
Greenpeace’s Keith Stewart said the FAO report proves axing cap-and-trade “is bad for the budget and worse for our environment.”
Beyond any environmental impact of withdrawing from the climate accord, Ontario will now be subject to Prime Minister Justin Trudeau’s forthcoming federal carbon-pricing scheme that could be more expensive.
It was exempt from that while it was part of the 2-year-old cap-and-trade accord with Quebec and California.
“Beginning in 2020, the federal carbon-pricing backstop will result in increased costs to Ontario households and businesses, but will also generate more … revenue,” the watchdog said.
“To illustrate, under the cancelled cap-and-trade program, the FAO estimates that a typical Ontario household would pay additional costs of $264 in 2019, rising to $312 by 2022,” he said.
“Under the federal backstop, a typical Ontario household would pay additional costs of $258 in 2019, rising to $648 in 2022.”
In a cap-and-trade system, businesses have greenhouse-gas emission limits — or caps — and those who pollute less can sell — or trade — credits for these to those who emit more pollution.
That creates an economic incentive to curb emissions because, over time, an industry’s cap is lowered.
But Ford, whose Progressive Conservatives defeated former premier Kathleen Wynne’s Liberals on June 7, decried cap-and-trade as a “carbon tax” and is eliminating it.
His decision could eventually lower gasoline by up to 10 cents per litre and reduce natural gas prices.
It also means forgoing around $1.9 billion in annual revenues that were, by law, earmarked for projects designed to reduce greenhouse gas emissions.
That money went toward environmental initiatives such as retrofitting public buildings, schools, and homes and subsidizing electric cars, which Ford has already cancelled.
The impact on the treasury, however, was not known until Tuesday.
Weltman noted in 2018-19, the “province’s budget balance is expected to deteriorate by $841 million, followed by a drop of $615 million in 2019-20, $771 million in 2020-21, and $787 million in 2021-22.”
The independent fiscal officer emphasized that his report did “not seek to assess the economic costs or benefits associated with carbon pricing” or “assess the potential environmental of public health benefits associated with the reduction” in greenhouse gas emissions.
He noted that there will be about $600 million in one-time costs to wind down some cap-and-trade spending programs as well as $5 million in compensation costs to offset businesses affected by the change.
Last week, the United Nations Intergovernmental Panel on Climate Change predicted there are 12 years to contain global warming to a maximum of 1.5C or risk further extreme weather occurrences.
Robert Benzie is the Star’s Queen’s Park bureau chief and a reporter covering Ontario politics. Follow him on Twitter: @robertbenzie