Ontario to sign cap-and-trade agreement with Quebec to cut carbon emissions

Ontario Premier Kathleen Wynne will sign an agreement today to join Quebec in a cap-and-trade system to reduce greenhouse gas emissions.

​She said the deal will create a "market mechanism" to encourage companies to move toward reducing emissions that lead to climate change.

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A cap-and-trade system allows companies to either cap their greenhouse gas emissions or buy credits from companies that have reduced emissions.

Wynne outlined the basics of the deal at an announcement in Toronto Monday morning.

Highlights include:

• A hard ceiling on the pollution allowed in each sector of the economy. 
• Proceeds from the carbon market will be reinvested in projects that reduce emissions.Wynne says it will be transparent how the money is spent.
• A process to reward companies that work to reduce greenhouse gas emissions.
• A long-term plan to join the largest cap-and-trade market, the Western Climate Initiative, which includes Quebec and California.

​"Right now, we allow polluters to put carbon into our environment for free," said Wynne.

Under the deal with Quebec, she said, "proceeds from carbon market will go back into the economy to drive growth."

Wynne said climate change is already imposing costs on society, damaging crops and increasing insurance claims. She warned the costs of not taking action will only get higher.

"Our changing environment has devastated communities, damaged homes, businesses and crops," she said. "It endangers our air, it endangers our water and the health of our children and grandchildren."

Certainty, and also costs

Wynne says cap-and-trade is a market solution, not a regulatory one, and will provide certainty for industry.

She admitted there will be added costs for consumers and industry.

For example, the government cited reports that estimate cap-and-trade will add two to 3.5 cents a litre for gasoline.

"It would be irresponsible of us to speculate on exactly what the costs are going to be when we haven't worked to design the mechanism yet," she said. That will come in the next six months, Wynne said.

The opposition Progressive Conservatives say cap-and-trade is a scheme that will hurt business in a province that has struggled to retain manufacturing jobs. 

"Cap and trade is a carbon tax by any other name," said PC MPP Jim Wilson.

Wynne was scheduled to fly to Quebec City to sign a memorandum of agreement with Quebec Premier Philippe Couillard around noon Monday.

Environment Minister Glen Murray says the government will consult the public as it develops the details for the cap-and-trade scheme by October.

The announcement comes after Ontario has held public consultations on how to reduce its carbon emissions. Sources say Monday's announcement is timed to set the stage for the provincial and territorial leaders summit on climate change being held the next day in Quebec City.

Quebec implemented its cap-and-trade system in January 2015. As of February, the province has auctioned off $190 million worth of credits to reduce emissions.

Quebec operates its cap-and-trade system with California. Monday's announcement means that Ontario, Quebec and California could set up a joint system to allow companies to trade their emissions among all three jurisdictions, if Ontario signs a separate agreement with California. 

Tom Rand, a climate change expert and senior advisor on clean energy technology, spoke to CBC's Metro Morning Monday before Wynne's announcement.

He said the agreement is a "big deal" and "an attempt to go around recalcitrant national capitals in both Canada and the U.S."

He criticized the Canadian federal government, which he said has been "ragging the puck" on climate change for 10 years.