What are the Differences Between Cap and Trade, Carbon Taxes, and Doing Nothing?

They both remove GHGs, but C&T is more effective than a CT because GHGs are reduced from all major sources of emissions, and not just one. With its carbon tax, British Columbia has lowered its GHGs by 5% to 15% since 2007. In contrast, in a shorter period of time, California and Quebec both exceeded their target GHG reductions with C&T, and so did Ontario.

In 2012, when Quebec implemented its C&T, it surpassed its GHG target of a 6% reduction from its 1990 level by an additional 2%. Ontario’s C&T reported that in 6 auctions, it reduced its GHGs for current and future years by 144,273,733 and 12,282,823 metric tonnes respectively. These numbers are accurate and up-to-date. This means a total of 157 million metric tonnes of GHGs were removed from the Ontario economy in 18 months. If the reducing cap participants were included, the total reduction in GHG for Ontario would be closer to 160 million metric tonnes. These are significant improvements to the planet’s health.

Capped emitters in C&T must report their emissions yearly, which is also more accurate than a CT. This regulated transparency and accountability also improves the government’s standing with long-term investors, especially for green bonds.

Since C&T has a broader base, revenues generated are in the billions of dollars in a short period of time. This allows the province to work with the municipal governments to implement climate change mitigation solutions where the majority of people live, thereby bringing about the biggest GHG reductions quickly.

Ontario had the money to provide generous incentives to get things moving by replacing old energy hogs for businesses and consumers. Industries could reduce their operating costs and improve their profits by replacing old equipment earlier than planned with better, smaller, and more efficient ones that use 75% less energy. Similar generous incentives were available for consumers to reduce their heating usage with new furnaces, windows, thermostats, and also generous incentives to replace their fossil fuel vehicles with electric cars and chargers. Through C&T, energy retrofits were done at schools, universities, and hospitals to further reduce GHGs. There was money for bigger expenditures such as green infrastructures for mass transit, cyclists, and pedestrians, along with tree-planting initiatives, and changes to the building codes to further reduce GHGs.

Is a CT or C&T bad for the economy?

No. British Columbia has had a $30 carbon tax on fuel at the pump since 2008, and its economy has grown 17% from 2007 to 2015. Quebec, on the other hand, has completely turned its fortunes around since implementing C&T in 2012. Most recently, it has had the strongest provincial economy in the last two years, largely because of C&T. In 2012, the same year that Quebec surpassed its GHG target of a 6% reduction from its 1990 level by 2%, its GDP increased by an impressive 54%. Quebec effectively debunked the myth that economic growth is tied to higher GHGs. Quebec became linked with California’s carbon market in 2014, thereby further decreasing GHGs. C&T has a bigger and broader positive impact on the economy than a CT.

With C&T, Ontario was on its way to keeping pace with Quebec and had created more than 130,000 new highly skilled jobs. Toronto and the vicinity were retaining and attracting many new companies that liked the expanding public transit system and high-speed rail. This was possible because the province had the billions of dollars of new money to invest in these new modern infrastructures. The six quarterly emissions allowance auctions generated $2.9 billion for the previous Ontario government. Unfortunately, the current government has stopped this expanding economy and new source of revenue for political reasons.

Is a CT or the C&T bad for business?

No. Neither one is bad for business. In fact, businesses have a lot to gain from a CT or C&T, but the gain is larger from a C&T.

What about higher electricity prices?

Ontario has had rising electricity prices over the last 10 years – not because of the introduction of renewables in their supply mix, but because of the nuclear refurbishments that cost more than $20 billion. When looking at the data, renewables were insignificant, but their introduction happened to coincide with the nuclear refurbishments. Due to the complexities of generating and operating the electrification infrastructure, it is easy for politicians to use the visible renewables as a lightning rod. As a result, although there was no C&T charge for electricity consumption, the previous government gave businesses and consumers substantial rebates from C&T on appliances and other solutions to reduce their electricity consumption and bills for political reasons.

Is a CT or the C&T bad for consumers?

No, they are not bad. Yes, consumers will be charged more, but they will consume less because of the new technologies, which means their bills will be the same, but more likely less than before these measures were introduced. In British Columbia, the fuel consumption dropped by 15% since 2007, but consumers had alternative transportation available such as public transit, bicycles, and walking so there was no citizen outrage. Plus, taxpayers benefited from a reduction in income tax. In Ontario, consumers benefited from the many incentives provided by C&T to lower their GHGs by adopting new technologies that lowered their energy costs, were better products, and created new jobs.

What about having neither a CT nor C&T?

The insurance industry is a good barometer for the costs associated with climate change. It was the first industry to raise the alarm in the early 2000s. When a small localized deluge occurred this past August in downtown Toronto, it cost more than $60 million in insurance claims. This is just a microcosm of the rising cost of climate change if nothing is done. More insurance companies are excluding coverage for severe weather events as they are no longer random “acts of God”, thus leaving more people and businesses exposed to greater risk from climate change.

It is clear that the status quo of doing nothing leads to a dead-end for a freight train. The outcome is not good for anybody. Alternatively, C&T is better than a CT at achieving a comprehensive economic policy that meets the needs of governments, businesses, and consumers and also helps the planet quickly by targeting all sources of GHGs. Without a healthy planet, all the other important things become irrelevant.

The views and opinions expressed in this article are solely those of the original author. These views and opinions do not necessarily represent those of ADEC Innovations, and/or any/all contributors to this site.

ADEC Innovations is a leading provider of ESG solutions, including fully-integrated industry expertise, software solutions and data management. Want to stay on top of the latest on global sustainability issues? Subscribe to our monthly newsletter, Greenwatch.