Gas prices in Ontario will rise about 4.3 cents a litre and residential natural gas bills will go up about $5 a month under
the Liberal government's cap-and-trade plan.

Premier Kathleen Wynne said she expects the program won't increase electricity costs for the industrial and commercial sectors. She revealed economic impacts Wednesday, a day before her government introduces its budget, which is expected to include more details about carbon pricing.

"The cost of doing nothing is much, much higher than the cost of going forward and reducing greenhouse gas emissions," she said.

However, revenue from the cap-and-trade auction set for next year will be used to "protect" consumers from an electricity rate hike and could even lead to rates going down, Wynne said.

Retrofitting and conservation programs could also be used to offset increases in natural gas bills, she said.

Green Party of Ontario leader Mike Schreiner said large emitters should not be given a "free ride" through temporary relief as cap-and-trade is implemented.

It is scheduled to take effect in January and the government expects to raise about $1.3 billion in its first full year of operation, money that will be devoted to lowering greenhouse gas emissions.

Finance Minister Charles Sousa denied Wednesday that cap-and-trade revenue would be used to lower the $7.5-billion
deficit, which the Liberals have promised to eliminate by 2017-18.

"It is not about reducing the deficit, it's about reinvesting to ensure that we meet the targets through the Western Climate Initiative," he said.

However, the revenues still have to show up on the government's balance sheet — as with the proceeds of the government's initial public offering of Hydro One.

The province's fall economic statement showed a 2015-16 deficit projection that was $1 billion lower than was forecast in last year's budget, and much of the drop was due to IPO revenue on the books.

The Liberal government has promised to dedicate the proceeds of asset sales, such as the Hydro One IPO, to the Trillium Trust, to fund their pledge of spending $134 billion over 10 years on infrastructure.