Toronto, ON – Ontario’s cap-and-trade program design options, released today, hits the mark with one exception: The plan to give 100 per cent free permits to many companies goes too far. Leakage concerns, where companies relocate to avoid carbon pricing, are real and they need to be addressed, but, if so-called energy intensive and trade exposed firms don’t have to pay for any of their emissions, there’s not much incentive to reduce those emissions.
We’re glad to see the government consulting on these program design details but we strongly urge Ontario to reconsider whether giving away so many free permits is needed. Neither California nor Quebec, Ontario’s cap-and-trade partners, gave out free permits to all the energy intensive trade exposed firms. Only firms with a high leakage risk got all their permits free in California. Ontario is proposing to give free permits to companies that have even a low level of leakage risk.
Putting a price on carbon pollution is the right thing to do, and cap-and-trade can be an effective way of setting that price. But for it to be effective, companies actually need to pay a price. That’s the whole point of a polluter-pays system. By putting a price on carbon, companies will be encouraged to reduce their emissions waste.
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