Ontario signs formal agreement to join Quebec-California carbon market in 2018

Ontario, Quebec and California signed an agreement Friday to create the world's second largest carbon market, with their leaders dismissing naysayers and predicting that more provinces and states would soon join.

Quebec and California have been jointly holding cap-and-trade auctions since 2014, and as of Jan. 1, 2018, those will now include Ontario, which has been running its own cap-and-trade system since Jan. 1 of this year, with three sell-out auctions in a row.

The system aimed at lowering greenhouse gas emissions puts caps on the amount of pollution companies in certain industries can emit, and if they exceed those limits they must buy allowances at auction or from other companies that come in under their limits.

Ontario Premier Kathleen Wynne said creating the world's largest carbon market besides the European Union is an important step.

"I think we cannot really overstate how important it is that we as these large jurisdictions ... play a leadership role and that as we move forward we work to bring other jurisdictions with us," she said after the three leaders signed the agreement in Quebec City.

Nova Scotia plans to introduce legislation for a cap-and-trade system this fall, and other provinces are weighing their options as the federal government has said they must set up a cap-and-trade system or impose a price on carbon.

Critics in Ontario have slammed both the cost to consumers — an extra 4.3 cents per litre to the price of gasoline and about $80 a year to natural gas home heating costs, as well as indirect costs — and the potential cost to the economy.

The auditor general has said that when Ontario links its market with Quebec and California, an estimated $466 million will leave the Ontario economy over three years, because it will be cheaper to buy allowances from those jurisdictions. Both the environmental commissioner and the auditor have said that means greenhouse gas emissions won't actually be cut in Ontario.

But Wynne has staunchly defended the plan, saying it is far more cost effective and effective at reducing emissions than a carbon tax, which the Opposition Progressive Conservative leader has touted.

"We have joined this carbon market because we believe that this is the best plan, that it is the cheapest way to reduce greenhouse gas emissions and that it is the best way to do that," she said Friday.

Quebec Premier Philippe Couillard later in the day defended the economic impacts of cap and trade.

"We are a living demonstration, and California is as well by the way, that you can put a price on carbon, including cap and trade...and it will not hurt your economy," he said, adding that Quebec is seeing record low unemployment and strong economic growth.

"To say that it had a negative impact on our economy is simply not supported by the facts."

Wynne's two colleagues were more blunt in addressing critics of cap and trade, and climate change deniers.

"I think we are close to the tipping point, with 60 per cent of the world GDP soon covered by a carbon market," said Couillard. "Who would have said that only five years ago? Of course, we always face resistance, by ignorance sometimes or lack of knowledge."

California Gov. Jerry Brown noted that the administration of U.S. President Donald Trump may not have an agenda of fighting climate change, but that is why it is important for subnational governments to move forward.

"Currently we are not following a climate agenda in Washington and at the highest levels in America, but at the grassroots, at the state level there is a very powerful movement growing by the day to take the steps necessary to make sure that our planet, that our organized civilization endures, and not only endures, but prospers because we align ourselves with nature," he said.

"The fact that some deny doesn't mean that others are not taking action."

New York has said it is looking into it, Brown said. China, Japan and Mexico have also talked about launching carbon markets.

"We're on the side of science," Brown said. "We're on the side of reality and because of that, others will catch on."

Ontario's proceeds from cap-and-trade auctions — about $1.5 billion so far this year, with one more auction to go — are going to green programs, such as energy efficient retrofits for homes and businesses, and providing smart thermostats to homeowners for free.

Allison Jones, The Canadian Press