Scrapping cap-and-trade will cost Ontario $3-billion in lost revenue: financial watchdog

Scrapping cap-and-trade will cost Ontario $3-billion in lost revenue: financial watchdog
Axing cap-and-trade creates $3B hole in Ford budget: FAO
The cancellation of the cap-and-trade system will cost $3 billion in lost revenue over the next four fiscal years, Ontario's fiscal watchdog said Tuesday, warning the decision would push the provincial budget further into the red.

Financial Accountability Officer Peter Weltman said the loss of revenue from cap and trade will be greater than the savings the government will achieve by cancelling spending associated with the program.

The federal government is expected to impose a $50-per-tonne carbon tax on provinces that dont have their own carbon limiting plan. The FAO estimates a federal backstop will cost the average Ontario household $648 in extra costs by 2022, versus $312 under cap-and-trade.

The new Progressive Conservative government revised the deficit to $15 billion last month, up from $11.7 billion predicted by the province's auditor general.

Cancelling cap and trade will result in $3 billion is lost revenue: FAO

Weltman could not immediately say what the province's deficit would be after factoring in the loss of revenue from cap and trade, but added that his office would provide an update on Ontario's deficit later in the fall.

The cap-and-trade system began in 2017, under the watch of Kathleen Wynnes Liberal government. It put a cap on the amount of greenhouse gasses Ontario businesses could emit. Companies that exceeded the cap could buy credits at auction.

"The challenge doesn't change," he said. "The deficit number becomes bigger."

The FAO also estimated that in the long run, the cap-and-trade system would have cost Ontario families less than the federal carbon tax. The federal government has indicated it plans to return the money raised by the tax directly to residents in the provinces opposed to the plan.

The Ford government cancelled the cap-and-trade program just days after being sworn in, calling it a cash grab and vowing Ontario households would save $260 per year.

Under cap and trade, the typical Ontario household would pay $312 annually in additional costs by 2022, said the FAO, compared to $648 under the federal system by the same year.

Eighty per cent of households in Ontario would be better off under that scenario than under cap-and-trade, Weltman told a news conference on Tuesday.

Premier Doug Ford campaigned on a pledge to cancel cap and trade during the spring election and has vowed to take Ottawa to court over its decision to impose a carbon tax.

The cancellation of cap-and-trade will come with a hefty $3 billion price tag over the next four years, according to Ontarios financial watchdog.

The province has introduced legislation to repeal the system, which was introduced by the previous Liberal government and puts caps on the amount of pollution companies in certain industries can emit. If they exceed those limits, they must buy allowances at auction or from other companies that come in under their limits.

The federal government intends to offer pardons to some Canadians who have been convicted of marijuana possession, CTV News has confirmed.

Environment Minister Rod Phillips said the government is keeping a promise it made to Ontarians during the election.

The FAO, Peter Weltman, also says the loss of cap-and-trade could expose homeowners and drivers even higher heating and gasoline costs.

NDP energy and climate change critic Peter Tabuns said cancelling cap and trade will hurt the environment and the lost revenue will have large implications for the province's books.

Smokestacks and pollution from Arcelor Mittals Dofasco mill in Hamilton, Ont. (Stephen C. Host/THE CANADIAN PRESS)

"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," he said in a statement.

Did you capture some amazing images or video? Share it with CTV News and it could appear online or on-air!

Green party Leader Mike Schreiner said the FAO's review shows Ford's cancellation of cap and trade is a "$3 billion boondoggle" that will send the province deeper into a fiscal hole.

"Premier Ford is putting politics and ideology over evidence, and it comes with a $3 billion price tag that the Conservatives are not being honest about," he said in a statement. "The FAO report reveals the real financial consequences of Ford's 'cut first; think later' approach to governing. He rushed to cancel cap-and-trade to make good on an ill-conceived campaign slogan. Now we are learning about the financial consequences."

Keith Stewart, senior energy strategist with Greenpeace Canada, said the FAO's report provides an "honest accounting" of the Ford government's decision to cut cap and trade.

"Rather than spending another $30 million on a lawsuit to try to block federal action on climate change, the premier should focus on how he can create good, green jobs that position Ontario to thrive in the new low-carbon economy," he said.

It is a priority for CBC to create a website that is accessible to all Canadians including people with visual, hearing, motor and cognitive challenges.

Ontarios financial watchdog says the Ford governments decision to cancel the provinces cap-and-trade system will lead to a loss of $3-billion in revenue over the next four years.

Financial Accountability Officer Peter Weltman said in a report released Tuesday that the loss of revenue exceeds savings from cancelling spending programs.

By cancelling cap-and-trade, the provinces annual budget balance will worsen by a cumulative total of $3-billion over the next four years, Mr. Weltman told reporters at Queens Park.

The news comes after Ontario Premier Doug Fords Progressive Conservative government increased its deficit estimate to $15-billion for the current fiscal year last month, up from $11.7-billion predicted by the provinces Auditor-General in May.

Ontario Environment Minister Rod Phillips said Tuesday the cap-and-trade program was not effective and the government would rather see money in families pockets. This was a tax that was bad for Ontarians, he said. $3-billion less for the government means $3-billion more for families.

Ontario Finance Minister Vic Fedeli said his government makes no apologies for bringing relief to families,” including an estimated $264 per household next year, according to cap-and-trade figures in the Financial Accountability Officers report. When asked if the province will be cancelling more programs, Mr. Fedeli said the governments finances will be revealed in the upcoming fall economic statement.

Peter Tabuns, NDPs energy and climate change critic, said he fears the Ford government will have to make cuts to services.

The biggest expenses we have in our budget are health care and education – I think thats where theyre going to go, he said.

To fulfill a campaign promise, Mr. Ford introduced a bill in July to end the cap-and-trade program and has also vowed to challenge the imposition of a federal carbon tax in court. Barring a successful legal challenge of the federal tax, the Ford government and other non-compliant provinces will be subject to a federal pricing backstop beginning next year.

Cap-and-trade, which was introduced by the former Liberal provincial government, puts caps on the amount of pollution companies in certain industries can emit. If they exceed those limits, they must buy allowances at auction or from other companies that come in under their limits.

The Financial Accountability Officers report also found that the federal Liberal governments carbon-pricing plan will impose higher costs than the cap-and-trade system beginning in 2020, although its not yet known how federal revenues would be returned to the province.

The report estimates that households will pay up to $648 per year under the federal plan by 2022, compared to $312 under cap-and-trade. However, Mr. Weltman said that if the federal government returns the money directly to the public, its possible about 80 per cent of Ontario households would actually end up paying less in taxes than under cap-and-trade.

Ottawa has pledged to impose a carbon tax on provinces, beginning next year, if they do not come up with their own pricing scheme for reducing emissions. The federal government will reveal in the coming weeks the details of how it will recycle the revenue, said Vincent Hughes, a spokesman for Intergovernmental Affairs Minister Dominic LeBlanc.

Mr. Phillips questioned how the Trudeau governments plan could save taxpayers money. When a government says that a tax is going to put more money in your pockets, most of us are skeptical about that, he said.

In the House of Commons on Tuesday, Conservative MP Pierre Poilievre argued the Liberals are burdening households with a carbon tax, but letting the industry off easy by only taxing a small portion of industrial emissions. The government adopted that approach to ensure industry does not move investment and jobs out of the country while still providing some incentive for the companies to cut their emissions.

Large industrial polluters get off scot-free while the average Canadians household has to pay more, Mr. Poilievre said.

Federal Environment Minister Catherine McKenna said Canada is already seeing the impacts of climate change in terms of Arctic melting, droughts and flooding which are expected to get far worse as global average temperatures increase.

There is a cost to pollution but we have always said we will give money back – give more money in the pockets of people who live in a province where the tax is collected, she said.

If you would like to write a letter to the editor, please forward it to [email protected] Readers can also interact with The Globe on Facebook and Twitter .

If you would like to write a letter to the editor, please forward it to [email protected] Readers can also interact with The Globe on Facebook and Twitter .

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.