Economists Urge Ontario to get Cap-and-Trade Details Right for Business and Climate

  • New recommendations from Canada’s Ecofiscal Commission outline four principles of policy design that will determine the success of Ontario’s cap-and-trade system.
  • Experts from the “front line” of cap-and-trade in California, Massachusetts, and Quebec to discuss recommendations and implications for business at Toronto event.

Toronto, June 3, 2015—Cap-and-trade can work effectively in Ontario to meaningfully and cost-effectively reduce greenhouse gas emissions, but only if government gets the details of policy right, advises Canada’s Ecofiscal Commission in a set of recommendations released today. While directed at government, the Commission’s new paper, The Way Forward for Ontario, also aims to engage and help inform Ontario industries and businesses—many of which are grappling to understand the impacts of cap-and-trade on their operations and bottom-line.

In April, the Ontario government announced its commitment to join Quebec and California in a cap-and-trade system designed to reduce emissions by putting a price on carbon. Following that announcement, there has been significant public discussion about the effectiveness of cap-and-trade as a policy approach. The government has yet to announce specific details of the system.

Written by the Commission’s director of research, Dale Beugin, and four of its prominent economists—Mel Cappe, former Clerk of the Privy Council; Glen Hodgson, Senior Economist at the Conference Board of Canada; Paul Lanoie, Professor of Economics at HEC, Montreal; and Chris Ragan, Chair of the Ecofiscal Commission—the recommendations for Ontario’s government center around four basic principles:

  • Stringency (i.e. the carbon price established by the “cap”) should drive meaningful reductions beginning now and rise gradually and predictably over time.
  • The policy should be broad, covering emitters (and emissions) across the whole economy.
  • Aim to auction most permits. Free permit allocations can reduce adverse competitiveness impacts, but should be used narrowly, based on clear, transparent rules and for a limited period of time.
  • Encourage other provinces and jurisdictions to join the linked system, increasing cost-effectiveness and advancing the path to broad harmonization across North America and beyond.

“The theme that runs through all of these recommendations is transparency and credibility,” says Ragan. “Ontarians—everyday consumers, small business owners and large emitters alike—must see the system as clear, fair, and immune from political interference.”

From an economic and business perspective, certainty, predictability, and confidence that decisions will be made based on data, not discretion, are critical factors, Ragan emphasizes. “Competitiveness is a real issue, but only for a small fraction of firms—those that are especially carbon-intensive and trade-exposed. We need to help those firms transition, and we need to do so in a way that does not undermine either the fairness or effectiveness of the policy.”

On June 3rd, at 5pm, the Ecofiscal Commission and the Martin Prosperity Institute are partnering to host a panel discussion—framed by these recommendations—on “The Competitiveness Question: Business Opportunities and Challenges in a Cap-and-Trade Environment.” The event will take place at the Rotman School of Management (Desautels Hall, University of Toronto), and by webcast (for details visit:
Speakers include:

  • Dominic Barton, Global Managing Director, McKinsey & Company
  • Guy Drouin, President and CEO, Biothermica
  • Michael Gibbs, Assistant Executive Officer, California Air Resources Board
  • Faith Goodman, Climate Change Consultant – Oil and Gas Industry
  • Ken Kimmel, President, Union of Concerned Scientists, former Massachusetts Environment Commissioner and former Chair of the Multi-State Regional Greenhouse Gas Initiative


“Ontario has the unique opportunity to get cap-and-trade right, straight out of the gate, by learning from the successes and failures of other systems. The Canadian fuels sector wants to be a part of this discussion and help move it forward.”
— Faith Goodman, Climate Change Consultant – Oil and Gas Industry

“My experience with the Regional Greenhouse Gas Initiative proved to me that cap-and-trade works.  Using market forces to lower carbon emissions is cost effective and helps grow a clean energy economy, and it works particularly well as a partnership across jurisdictions.  Ontario has a wealth of successful models to draw on in designing its policy.”
–Ken Kimmel, former Chair of the Multi-State Regional Greenhouse Gas Initiative

“There is a movement across many countries towards pricing carbon and cap-and-trade systems in particular. There is a huge opportunity for Ontario, Quebec and California to establish a best-practice template that could accelerate the linking of different carbon markets together, supporting the transition to a low-carbon economy.”
–Dominic Barton, Global Managing Director, McKinsey & Company

For more information about the Ecofiscal Commission and to download its recommendations for Ontario’s cap-and-trade policy, visit:

To schedule an interview with Chris Ragan, Chair of the Ecofiscal Commission, or select members of the panel, contact:

Jenn Wesanko
(604) 347 – 5988


Economic policy experts available for comment on Ontario’s cap-and-trade announcement

Toronto, April 13, 2015 —Economists from Canada’s Ecofiscal Commission are available to provide insight into the economic and environmental context of Ontario’s newly announced cap-and-trade commitment, and the factors that may determine its effectiveness as a carbon-pricing policy.

Canada’s Ecofiscal Commission is an independent group of leading economists from across the country focused on advancing fiscal policy reforms that will improve Canada’s economic and environmental outcomes.   Last week, the Commission released a substantial new report focused on provincial carbon pricing: The Way Forward: A Practical Approach for Reducing Greenhouse Gas Emissions in Canada.

Chris Ragan is the Chair of Canada’s Ecofiscal Commission, professor of economics at McGill University and a Research Fellow at the C.D. Howe Institute.

Paul Boothe is the Director of the Lawrence National Centre for Policy and Management at the Ivey Business School, Western University and a member of Canada’s Ecofiscal Commission.

Both can discuss new research from the Commission regarding the advantages of pursuing carbon pricing at the provincial level. They can also provide insight into the key policy details that matter in terms of effectiveness as well as the opportunities and challenges Ontario’s policy will need to address.


“As provinces look at ways to achieve their climate commitments, Ontario is showing what is possible. Our research shows that every province stands to gain more from pricing carbon—whether through a tax or cap-and-trade system—than from a regulatory approach.”   – Chris Ragan, Chair, Canada’s Ecofiscal Commission

“Ontario’s commitment is an important step forward. The next critical step will be working through the details of policy—stringency, coverage, and how permits are allocated. These decisions will determine how well the policy performs to meet environmental and economic goals.” – Paul Boothe, Canada’s Ecofiscal Commission

Provincial Governments Urged to Adopt Carbon Pricing Policies

  • Canada’s Ecofiscal Commission says provincial carbon pricing will keep Canada competitive in a changing global economy.

Toronto, April 7, 2015 –All provinces should adopt or strengthen carbon-pricing policies to position Canada for success in a global economy that increasingly values low-carbon activities, according to a new report released today.

The Way Forward: A Practical Approach to Reducing Canada’s Greenhouse Gas Emissions by Canada’s Ecofiscal Commission says delay in implementing climate policy will mean higher future costs for all Canadians. Regional differences make a one-size-fits all approach challenging. Provincially customized carbon pricing policies present a practical way to make national progress on lowering emissions today.

“Getting moving now allows policy to begin reducing greenhouse gas emissions immediately and then ramping up to yield more significant reductions over time,” says commission chair Chris Ragan, an associate professor of economics at McGill University in Montreal and former Special Advisor to the Governor of the Bank of Canada.

“Carbon pricing at the provincial level will give households the incentive to adapt their behaviour, businesses the certainty and flexibility to invest in low-carbon solutions, and provinces the ability to customize policy in ways that make the most sense for their economies and priorities,” he says. “The world is gradually moving away from carbon, and will move even further in the next 40 years. Canadian firms will fare much better if we start making that transition now.”

Released today, the Commission’s report explores two central issues. First, why provincial carbon pricing is the practical way to move forward on achieving meaningful, low-cost reductions in GHG emissions. Second, which details and fundamentals of policy design need to be considered as provinces take their next steps.

According to the report, a comprehensive and consistent carbon price across Canada is the ultimate goal, but moving forward now through independent provincial action makes good sense.

“Provinces not only have the jurisdiction to price carbon, they already have a head start. British Columbia, Quebec, and Alberta have all implemented different approaches to carbon pricing, Ontario has indicated that it’s ready to move in the next year, and there is a live discussion taking place in Nova Scotia,” says Ragan.

All provinces and Canada as a whole stand to benefit more from carbon pricing than any other type of climate policy, he adds. And while there is an overall national benefit to coordinating provincial policies, the biggest wins come from all provinces putting their own independent pricing policies in place.

“Provinces have every reason to put smart and practical carbon pricing policies in place now. They don’t need to wait for anybody. We all stand to gain from provincial action,” says Ragan.

The report concludes with four recommendations for Canadian policymakers:

  • All provincial governments should move forward by implementing carbon-pricing policies.
  • Provincial carbon-pricing policies, existing and new, should increase in stringency over time.
  • Provincial carbon-pricing policies should be designed to be as broad as practically possible.
  • Provinces should customize details of policy design based on their unique economic contexts and priorities; they should also plan for longer-term coordination.

About Canada’s Ecofiscal Commission

Established in November 2014, Canada’s Ecofiscal Commission is a unique effort to advance fiscal policy reform for the benefit of Canada’s economy and environment. The commission comprises a dozen prominent economists from across Canada’s regions and 16 advisors including former political leaders and leaders from the business sector.

Over the next five years the commission will publish and promote discussion of research and recommendations grounded in Canada’s unique and regionally diverse economic and policy context. It will focus on issues most relevant to Canadians and policy-makers including those affecting fresh water, air quality, environmental disasters, greenhouse gas emissions, transportation and road congestion.

Its first report (November 2014) showed that smart fiscal policies could be used to significantly reduce greenhouse gas emissions, pollution and waste, while stimulating innovation and growth. The Commission termed these ecofiscal policies ‑ a new word to facilitate a new conversation about solutions guided by both economic and environmental objectives.

The Commission is funded by several Canadian family foundations and Canadian corporations.

For more information about the Commission and to view its reports visit:


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