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If a government feels that they must tax something, this tax should be open and understood. A cap-and-trade method of implementing a carbon tax is anything but transparent. What will happen is that firms will have to pay more to produce goods and this will be passed along to consumers, who will likely not connect the increase in the price of goods with the carbon tax.

Therefore, implementing a carbon tax through a cap-and-trade system could be viewed as a cynical political manner in which to tax something without the government taking blame for instituting the tax. From this perspective, if a government feels that they must institute a carbon tax, then why not just put a tax on gasoline, as was done in British Columbia?

The odd thing about this agreement is that no details have been announced. The success of a cap-and-trade system depends crucially on how it is implemented. In Europe, implementation of the cap-and-trade system led to very high electricity prices and failed to reduce emissions. It is easy to see why Quebec is in favour of this agreement, as they generate electricity largely through hydro power, but the only reason for Ontario to enter this agreement is so that they can be perceived as being “green” while finding a new method to tax Ontarians.

Premier Kathleen Wynne has announced that the money raised from this tax will be diverted into more green energy initiatives. This is a very bad idea. Ontario’s recent green initiative forced the province into wind and solar power, which are very expensive forms of energy. Accordingly, electricity prices increased dramatically.