Oakville businesses are expressing concern and uncertainty around the Provincial government’s recent announcement on its planned implementation of a cap and trade system.
What is Cap and Trade?
A system where the government caps the total amount of emissions allowed. Companies are issued permits by the government stipulating exactly how much carbon the company can emit. If it is necessary for the company to produce more than its allotted amount of carbon, it must purchase credits from other companies that have emitted less.
Since the April 2015 announcement, the details surrounding the design and implementation of this significant policy have not been outlined. This has left businesses concerned about the potential impacts this system will have on employers, specifically adding an additional operating cost alongside rising electricity prices, high WSIB premiums and the Ontario Retirement Pension Plan. Businesses are feeling tapped. Ontario is in an uncertain economic climate and businesses are already burdened by onerous regulations.
In addition, they are seriously concerned about the further negative impact on their competitiveness relative to other jurisdictions. This may compel companies to relocate their production to other jurisdictions with little or no policies on carbon emissions, commonly referred to as “carbon leakage”. Under these circumstances the GHG emissions are simply relocated to another jurisdiction. This weakened competiveness could lead to poor economic and environmental outcomes.
Some argue that for this reason the cap and trade system only makes sense when the policies are global in nature.
In response to the above concerns, the Chamber network has requested that the Ontario government conduct, and publicly release, the results of an economic analysis of the proposed cap and trade system.
Another concern voiced by the business community is the “snow ball” effect created by cap and trade. In other words, many businesses not directly impacted by the system could realize similar consequences of the rising costs of business like increased electricity costs. These additional costs will eventually stream down to the consumer.
There are other outstanding issues yet to be revealed such as the government’s intentions with the revenue generated from the cap and trade system, as well as the government’s commitment to reducing GHG emissions through other environmental policies not being borne by business alone. None of these have been addressed.
Various models are available in which the government could redistribute the revenue generated by this system. In British Columbia, for example, the government has taken a revenue neutral approach to its carbon tax by returning the revenue to individuals and businesses in the form of tax deductions and credits. In Quebec, the revenue generated is dedicated to fund the province’s 2013-2020 Climate Change Action Plan. This in turn funds carbon reducing programs for business, citizens and municipalities.
Recognizing that Ontario’s businesses are the backbone of our economy, and that many businesses have already embarked on sustainability initiatives of their own, the Oakville Chamber believes that the government should consider rewarding employers who have already instituted environmental initiatives. Providing businesses with rewards and incentives would support business success.
To that end, the Oakville Chamber will continue to advocate on behalf of its membership and urge the government to explore polices that foster business and stimulate economic growth.