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The California/Quebec cap and trade market Ontario Premier Kathleen Wynne is counting on to fund her $8.3-billion climate action plan just crashed, again.
This is the highly speculative carbon trading stock market Ontario will join next year that Wynne is relying on to fatten her government’s coffers by $1.9 billion annually.
This so it can fund its various and sundry green energy initiatives, such as subsidizing Ontario’s electricity rates by up to $1.3 billion - which isn’t actually a green energy initiative.
The problem now confronting Wynne is that in three of the last four quarterly auctions under the California/Quebec cap and trade carbon pricing scheme, only a fraction of the available carbon permits have been bought by industrial greenhouse gas emitters.
Since the sale of these permits is how governments make money from cap and trade, it means their anticipated revenues from carbon pricing have been repeatedly slashed by hundreds of millions of dollars, throwing the future of their green energy programs into doubt.
Ontario will hold its first internal carbon permit auction later this month, although it’s hard to see how even the Liberals could screw that up since they set all the rules.
But once Ontario joins the California/Quebec cap and trade market next year, all bets are off.
In its just-completed February auction, only 18% of the available carbon permits sold.
That’s particularly alarming because this round of permit sales was expected to be strong, since 88% of available permits sold in the last auction in November, 2016.
That followed two weak auctions where only 35% of the available permits were sold in August, 2016 and 11% in May, 2016.
When the California /Quebec market first crashed last May, Wynne initially took an alarmingly cavalier attitude toward it, suggesting to me she didn’t understand the potential financial implications for Ontario.
Wynne dismissed the crash with a non-answer, saying: “California is ahead of us, and we’ve got some catching up to do. We’re pushing ahead, and there’s a lot of innovation that I know can happen in Ontario, and that’s what our cap-and-trade program is going to be about.”
A week later, perhaps after being briefed by someone who understood what had happened, Wynne acknowledged her government might have to lower its anticipated revenues of $1.9 billion annually from cap and trade in light of the crash of the California/Quebec market.
At that point Wynne told CBC Radio: “It’s a market. We know that there will be highs and lows ... It was this round that it was not as good. We just don’t know what the market will be. That ($1.9 billion) is our projection. If we have to revise the projection then we will.”
Of course, if Ontario has to slash its anticipated $1.9 billion in annual revenues from cap and trade, how is it going to pay for Wynne’s $8.3 billion (over five years) climate action plan, without raising taxes or plunging the province even further into debt?
Even if Ontario realizes $1.9 billion a year from cap and trade, that will be paid for by Ontarians in the form of higher retail prices for almost all goods and services.
Meaning either way, we lose.
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Originally Posted by NickD
