Bill 4, Cap and Trade…

Bill 4, Cap and Trade Cancellation Act, 2018 will be detrimental to the economy of Ontario and should be withdrawn. The following is a list of the threats this legislation poses to Ontario's future economic prosperity:

The momentum towards a global low-carbon economy is building and the transition from high carbon-emitting economic activities is inevitable. It is in the economic interest of all jurisdictions to adopt the most efficient method of managing this transition. Economists have been studying the economic effects of a wide range of climate policy instruments for decades, and the overwhelming conclusion countless economic studies have reached is that placing a price on carbon emissions is the lowest-cost approach to reaching carbon reduction targets. Bill 4 would prevent Ontario from preparing for the coming economic transition in the most economically efficient manner possible.

The main objections to carbon pricing instruments such as cap-and-trade are that they will deter investment, reduce profits, threaten jobs and undermine economic growth. Such concerns are not supported by data on the economic performance of other jurisdictions in which carbon pricing policies have been in place for many years. Countries in northern Europe adopted carbon pricing policies in the 1990s and since that time all have enjoyed some of the highest levels of GDP per capita in the world. Within Canada, the adoption of carbon pricing by British Columbia ten years ago has not prevented that province from having one of the strongest economies in the country and the lowest unemployment rate.

All major economic transitions entail costs for some sectors of the economy. The transition to a more integrated North American economy with the introduction of NAFTA is an example of such structural change. Those affected sectors can be assisted in their adjustment to changing economic conditions through temporary government support.

The threats to the Ontario economy from cancelling the cap-and-trade system are greater than any adjustment costs of maintaining it. The first of these threats is its effect on investment. Cancelling a significant piece of legislation that resulted in companies making major adjustments to their current operations and future plans raises questions about the stability of the Ontario regulatory environment. Investment may further be deterred if companies operating in Ontario respond to the cancellation of cap-and-trade by relaxing their plans to reduce carbon emissions. Given the growing emphasis on carbon disclosure among major investment funds such relaxation will be a cause of concern for risk-averse investors.

Carbon pricing has the effect of improving the cost competitiveness of industries in the low-carbon sectors of the economy. By eliminating this incentive to reduce carbon emissions, the legislation also removes an important tool for ensuring that Ontario is a leader in some of the fastest growing markets in the global economy. Not only will this be a lost opportunity to profit from the burgeoning global green economy, but it will also harm the ability of traditional industries to access markets in which consumers are becoming increasingly attentive to the environmental sustainability of the production processes behind the products they consume and as governments in other countries legislate controls on the import of such products.

In conclusion, if the current Ontario government wishes to fulfill its election promises to open Ontario for business, bring prosperity to the province and create good jobs, it will withdraw Bill 4.