The Ontario government risks…

The Ontario government risks losing significant credibility if it continues to oppose carbon pricing in all forms. Carbon pricing is cheaper than any other policy option and is the best tool we have to fight climate change. According to the recently published IPCC report, "Policies reflecting a high price on emissions are necessary in models to achieve cost-effective 1.5°C consistent
pathways" (http://report.ipcc.ch/sr15/pdf/sr15_chapter2.pdf). If not carbon pricing, then what?

Most Ontarians support the government’s active role in reducing greenhouse gas emissions to fight climate change. And businesses and investors are ready to make investments to reduce their environmental impact. But they require regulatory certainty in order to invest in low-carbon projects that will set Ontario on a path towards becoming a leader in the global opportunity that is estimated to be worth $26 trillion (https://newclimateeconomy.report/2018/).

So how should the PC’s move forward on climate policy? Contemplating “small – c” conservative fiscal principles should be a start.

Basically, fiscal conservatives advocate for low taxes and market efficiency. Every small-c conservative would agree that markets, rather than governments, are more effective at allocating scarce resources efficiently.

Ontario already had a market that allocates resources to emission reductions – the cap and trade program. Unfortunately, Bill 4 has put the current government in a difficult position as it intends to cancel the cap and trade program. But, what may surprise many, is that cap and trade is an inherently conservative idea. In fact, the US Republican party was the first to advocate for a nation-wide cap and trade program back in 1990 and then again in the early 2000’s. The cap and trade framework has been used successfully to address other environmental problems including acid rain and ozone depleting substances.

Another conservative principal for policy making is that economic freedom, entrepreneurial spirit and the right to private property are essential to economic prosperity. Industry and businesses in Ontario have an entrepreneurial spirit and understand the opportunities and prosperity that came with the cap and trade program. Indeed, many businesses are very supportive of cap and trade, evident by the government held auctions where emission allowances consistently sold out. Businesses across the province developed specialized teams to optimize their carbon market positions, developed strategies to reduce their emissions, and planned long-term investments that are dependent on prices set by the cap and trade system. Do these investments have to be for nothing?

Rather than cancelling cap and trade, Mr. Ford could tweak the cap and trade program to fit with the PC Party’s intention to “open Ontario for business”, create good jobs, and put more money in Ontarians’ pockets. For example, the PCs could adjust how cap and trade revenues are used. Revenue could be returned directly to tax-payers or could be used to reduce Ontario debt rather than providing subsidies for electric vehicles or other initiatives. Diverting cap and trade revenues from the initiatives in the climate action plan to taxpayers may help accomplish the broader PC objective to decrease the cost of living for Ontarians.

“Small c” conservatives also understand trends in business and emerging markets. Carbon markets are expanding around the world, including China – the world’s largest emitter. By maintaining the cap and trade program, Ford will help Ontario’s businesses prepare for a future where opportunities in carbon markets are global. If Ontario businesses can develop expertise in carbon markets at home, they will be prepared to capitalize on opportunities and investments from abroad. Meanwhile, large institutional investors are also beginning to prioritize investments in jurisdictions with robust carbon pricing policy.

By dismantling Ontario’s cap and trade system, the PC government has not only risked dragging Ontario behind its peers, but will cause Ontario to be regulated by a federal program that is less favourable for Ontario businesses.

The new PC Government can absolutely maintain the existing cap and trade system. This may require a sacrifice of political capital, but the benefits are consistent with conservative principles. Maintaining and tweaking Ontario’s cap and trade system is the right thing to do keep Ontario’s economy competitive and will show that the PC party is embracing its conservative principals of fiscal responsibility and taking responsibility for the conservation and renewal of our environment for present and future generations.

As a professional working in the carbon field and a citizen of this province, I strongly urge Ontario to put a price on pollution and maintain the cap and trade program. Making polluters pay for their emissions and returning the revenues to the pockets of Ontarians so they can lower their carbon footprint is the best way forward.