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Ontario plunges into cap and trade with first carbon auction

The Ontario government's new climate-change plan kicks into high gear today, but the opposition leader is vowing to scrap the program if he wins next year's election.

PC leader Patrick Brown would withdraw province from program, bring in carbon tax instead

Ontario motorists and homeowners have been spending extra to fill up their cars and heat their homes since Jan. 1, under the new cap-and-trade program. Today, industries start paying their share, with the province's first auction of carbon emission allowances. (Darryl Dyck/Canadian Press)

The Ontario government's new climate-change plan kicks into high gear Wednesday, but the opposition leader is vowing to scrap the program if he wins next year's election. 

The province holds its first-ever auction of greenhouse gas emission permits under its new cap-and-trade program this afternoon. Fuel companies, natural gas distributors, auto makers, steel mills and chemical factories are among the firms purchasing the permits.

Companies have already been passing on the costs to Ontario drivers and homeowners by charging extra for fuel and home heating since Jan. 1, when the program took effect. 

Wednesday's auction — one of four to be held this year — could generate $513 million for the province if all the carbon allowances are sold at the minimum price. The government is estimating the program will raise $1.9 billion annually and by law must put the money into projects that reduce greenhouse gas emissions, such as public transit and home energy retrofits.  

PC leader Patrick Brown said Tuesday he would "withdraw" the province from the Western Climate Initiative, the joint cap-and-trade program bringing together Ontario, Quebec and California. 

Brown prefers carbon tax

"I would dismantle cap and trade," Brown said in response to a question from CBC News. "It makes Ontario less competitive and if it was really about the environment it would not be a revenue tool for government." 

Brown called the program "a $1.9-billion cash grab."  

He is promising instead to implement a carbon tax to cut emissions and make it revenue-neutral by providing rebates of some combination of income tax, sales tax, or small business taxes. "We're still going through our policy process on that," Brown said. 

PC leader Patrick Brown said if he wins the 2018 election, he will withdraw the province from the Western Climate Initiative, the joint cap-and-trade program bringing together Ontario, Quebec and California.

The Liberals reject the "cash-grab" claim. "Our approach guarantees greenhouse gas reductions at the cheapest price possible, unlike Brown's carbon tax which would cost families four times more," said a statement from the Liberal caucus.  

The most recent auction involving California and Quebec's joint carbon market sold just 18 per cent of the available permits. That result was labelled "disastrous" by Chandan Kumar, chief economist for Climate Connect, a company that monitors carbon markets around the world.

Analysts expect Wednesday's Ontario-only auction will be far more successful and sell most of the 25 million allowances available. 

"In the next year or so, we can expect a bunch of action in the Ontario auction," said Dave Sawyer, head of the consulting firm EnviroEconomics, in an interview Tuesday with CBC News. 

Under the terms of the auction, Ontario industries must pay at least $13.57 (US) for each allowance, equivalent to one tonne of carbon emissions. 

There is some uncertainty about the future of California's participation in the cap-and-trade program. The California Chamber of Commerce is challenging the program in court, arguing that it's a tax that should have required a two-thirds majority in the state legislature. A lower court rejected that argument, but the business group is appealing.

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