A better trade-off analysis of Ontario Carbon Pricing choices

I provide evidence-based analysis to governments, industry and ENGOs. And that evidence can help inform the debate around carbon pricing choices. This note updates my previous note (here) by providing a more comprehensive view of the possible outcomes of the alternative policy choices for carbon pricing in Ontario. I do this to lay out the analysis in full for the sake of transparency.

In a note downloadable here, I look at the trade-offs of two competing visions for carbon pricing in Ontario: a continuation of cap and trade as legislated by O. Reg. 144/16 (a quantity-based scenario) and a transition to a price-based policy which includes an economy-wide carbon tax and output based pricing for the large industrial emitters. These two policy scenarios match competing political platforms in the upcoming Ontario provincial election: the Liberals will continue with O. Reg. 144/16 and the Climate Change Action Plan while the Progressive Conservatives support a revenue neutral carbon tax with output based pricing for LFEs.

For both scenarios, the reported outcomes include Ontario GHG reductions from regulated entities, compliance from other instruments, revenue and GDP impacts.

Note that the analysis does not match our regulatory work completed for Ontario’s Cap and Trade program (here). That regulatory impact analysis is our best view on the outcomes of O. Reg. 144/16. This new analysis should not be considered an update to our regulatory impact analysis of O. Reg. 144/16.