Cap and trade to cost people, business $8B in first years: auditor

TORONTO — Ontario's cap-and-trade program will cost the province's consumers and businesses $8 billion dollars in its first years of operation to get minimal greenhouse gas reductions, the auditor general said Wednesday.

In her annual report, Bonnie Lysyk said households will pay an average of $156 next year in added costs on gasoline and natural gas, rising to $210 in 2019 plus another $75 that year in indirect costs on goods and services.

The government has also earmarked $1.32 billion out of the expected $8 billion in projected cap-and-trade revenue to help offset the cost of residential and business electricity bills, but it doesn't say how, Lysyk's report said.

And the impact will likely be marginal, she said. Even with a subsidy, the average household electricity bill is projected to increase 23 per cent from 2015 to 2020, Lysyk found.

"Such increased electricity costs may make natural gas, which is responsible for significantly more greenhouse gas emission than cleaner energy sources like solar, hydro, nuclear and wind, an even more economical option," she wrote.

The carbon pricing scheme, set to come into effect Jan. 1, will likely achieve fewer than 20 per cent of the emission reductions the government wants to see by 2020, Lysyk said.

The Liberal government has set an emissions reduction target for that year of 15 per cent below 1990 levels, which would require an estimated 18.7 megatonnes of reductions.

But because the system, which requires polluters to buy emissions allowances, will link with Quebec and California in 2018 the government plans to count emission reductions achieved in those jurisdictions, Lysyk said.

"The potential exists for double reporting of emission reductions between California, Quebec and Ontario," she said.

Lysyk's conclusions echo those of the environmental commissioner, who recently said that Ontario's cap-and-trade program won't actually limit greenhouse gas emissions through to 2020 because it will often be cheaper for Ontario polluters to purchase California allowances.

Environment Minister Glen Murray defended the cap-and-trade plan, saying it is the best tool to both reduce greenhouse gas pollution and minimize the financial impact on families and businesses.

"A reduction in greenhouse gas pollution anywhere, not just locally, benefits us all," he said.

The government currently regulates polluters through an Environmental Approvals program, but Lysyk found that about 80 per cent of emitters granted approvals in the last 15 years have never been inspected.

Of those the government did inspect over the last five years, about one-third were violating the conditions of their approvals, the auditor said.

The government doesn't monitor more than 200,000 approvals issued more than 15 years ago and it doesn't even know how many of those emitters are still operating, Lysyk found.

The auditor also looked at Ontario's environmental assessment process, finding it lacking in areas. Ontario is the only province that doesn't require environmental assessments for private-sector mining and chemical manufacturing projects, she said.

Four former private-sector mineral extraction sites alone will cost nearly $1 billion to clean up, Lysyk found.

Murray said the approvals process is "among the most protective in North America," but hasn't necessarily "kept pace with the demands of Ontario's growing economy." The ministry will look at how to better identify emitters operating without proper approvals and ensure it is collecting amounts that represent true clean-up costs.

Allison Jones, The Canadian Press