We can begin by addressing one of the criticisms that's already been heard from the environmental movement: instead of CAT, Ontario should have imposed an outright carbon tax in order to change behaviour all across the economy. Well, there may not be anything actually labelled as a carbon tax in Ontario at the moment, but look at the facts.
- Ontarians already pay some of the highest prices in North America for electricity, despite having one of the world's most recognizable and long-established renewable power sources at Niagara Falls. Power bills have shot up in recent years as a result of previous governments' commitment to phase out coal-based generation (now accomplished) and to provide hefty subsidies to renewable alternatives, such as wind and solar. The generating system is so messed up that surplus power frequently ends up being sold at a loss to neighbouring jurisdictions. Millions of "smart meters" have been installed to allow punitive rates to be charged for electricity use in peak periods. Yet the Energy Minister recently pointed out, with something that sounded almost like pride, that electricity bills will rise by a further 10 percent in each of the next three years, as Ontario continues to pursue its "green" goals.
- Fuel for transportation is already heavily taxed by the Province, with the result that the recent rout in global energy prices is far from being fully reflected at the gas pumps.
All in all, you'd have to say that if high energy prices were sufficient to persuade corporations and citizens to curb their energy use, Ontario should already be one of the least-polluting jurisdictions on the continent. But it isn't, so maybe it's no surprise to find the Province looking at the more dirigiste approach of CAT instead.
CAT, as the name implies, involves setting an overall cap on carbon emissions, with businesses then allocated pollution quotas. Those quotas can be sold (traded) by companies that don't need them to those that do. This is supposed to create incentives for companies to become more fuel efficient over time. Ontario has provided absolutely no details of how its scheme will work, but two things seem certain: there will be a lot of bureaucracy, and all manner of investment banks and such will be gleefully figuring out ways to get in on the "trade" part of the action. Come to think of it, that means that three things are certain, the third being that someone (ultimately the taxpayer) is going to be footing the bill.
Business reaction has been muted so far. General Motors almost seemed to welcome the CAT announcement, seizing on the opportunity to toot the horn for its expanding line of electric and hybrid vehicles. However, Jayson Myers of the Canadian Manufacturers Association was more cautious, warning that CAT might prove to be just another factor helping to force businesses out of the Province, unless some of the revenues were used to help firms to pay for more efficient equipment. I suspect that the Government will retort that it's businesses' own responsibility to do that, and in any case it's clear that the money is already spoken for, as far as the Government is concerned. The proceeds will apparently be applied to environmentally-friendly uses such as transit expansion, an area in which Ontario's needs are immense.
In adopting CAT, Ontario is joining its neighbour in Quebec and a number of other significant North American jurisdictions, including California and British Columbia, in attempting direct controls on polluting activities. Even after the wholesale factory closures in recent years, Ontario is much more dependent on the manufacturing sector than any of those other jurisdictions, so it has more to lose if the scheme goes awry and, as the CMA's Myers warns, drives more businesses out of the Province. As more details of the likely costs emerge, CAT is likely to become unpopular among voters, and success is far from assured. Still relatively early in her term in office, Premier Kathleen Wynne is taking her biggest gamble.
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