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First, some companies will worry, justifiably, about losing out to their competitors in other jurisdictions where there is no carbon price.

Second, some companies in emissions-intensive industries will need to spend a lot of money on technology in the early years of cap and trade before they can reduce emissions at all. So asking them to pay for permits at the same time as they pay for those investments could cause problems for those sectors. Industries that are often cited as examples of emissions-intensive and trade-exposed include cement, steel, and pulp and paper.

Exempting companies or industries from the program altogether, though, is probably the worst possible way to address those concerns.

“You want to cast your net as wide as possible,” says Ragan. “And to exempt one sector and not another is divisive.”

A carbon price that does nothing at all about some of the province’s most emission-intensive industries would be pointless, as well as being distortionary and unfair.

Mike Schreiner, leader of the Green Party of Ontario, says the lobbying for special treatment from powerful companies is about to get very intense – if it isn’t already. “The Liberals are going to have to grow a spine if they’re going to do this because they’re going to have to say ‘no’ to their friends.”

… help companies adapt

There are ways to help those companies without reducing their incentive to innovate and reduce emissions, though.

One way, especially with whatever industries are deemed to be trade-sensitive in Ontario, is to counter-balance the carbon price with some sort of subsidy or tax holiday. This might seem zero-sum, but it has the benefit of still encouraging those companies to reduce emissions. In fact, if they get a subsidy and the opportunity to save money by reducing emissions, those companies will come out on top in a few years’ time, and be more innovative and productive to boot.