CAP-AND-TRADE — OR RATHER, TAX-AND-GRAB — COMES TO ONTARIO
This column was originally published in the National Post.
Brace yourselves — and your wallets — a new tax is coming to Ontario. Premier Kathleen Wynne has announced her plan to establish a cap-and-trade scheme.
Don’t be fooled, a cap-and-trade scheme is a carbon tax by another name. Only it’s a tax that applies to all goods and products (not just gasoline, natural gas and coal like in British Columbia), requires the establishment of an enormous bureaucracy to manage it, and has been rife with fraud.
In a cap-and-trade system, Wynne’s cabinet will set arbitrary limits for carbon emissions by businesses and then force those businesses to buy “carbon credits” if they emit more than their allotment.
The price of these carbon credits is passed down to the consumers, which increases the price of just about everything. With the highest electricity prices in North America, rising housing costs, the looming proposal of an Ontario Pension payroll tax, and stagnating income levels, this carbon tax is going to hurt Ontario families where they already hurt the most — in their wallets.
This cap-and-tax is a cash grab, pure and simple. Wynne is faced with a $10.9 billion deficit, $280 billion provincial debt, and she reportedly expects to raise between $1 billion to $2 billion selling carbon credits.
It is a virtual certainty that this revenue generated off the backs of Ontario’s families will go toward fuelling this government’s spending problem, rather than balancing the budget or cutting debt. Surely, some of that new spending will be to establish a new government agency to administer this complex cap-and-tax scheme.
There is one other group who could make money on this new tax. In many cap-and-trade schemes, like in Quebec and the European Union Emission Trading System, additional credits can be purchased from companies that are involved in so-called emission-reduction projects. These “offset” credits are generated and sold by companies involved in such projects as the destruction of refrigerants, or in renewable energy production.
The full details of Wynne’s new carbon tax scheme have yet to be revealed, so it is not a certainty that offset credits will be a part of the plan. Nevertheless, offset credits are a typical component of carbon-trading schemes, and a component that has been manipulated by fraudsters in other jurisdictions.
The destruction of refrigerants is a particularly troubling example. In 2010 it was uncovered that Chinese chemical companies were intentionally producing an environmentally damaging refrigerant, simply to earn valuable offset credits for destroying it, which they would then sell on the European carbon market. The carbon market created a perverse incentive for Chinese companies to produce a chemical that was actually 11,000 times more damaging than the European-produced CO2 it was intended to offset.
That’s hardly the only example of fraud. Interpol has an entire program dedicated to environmental and carbon-trading crime. In fact, there were so many various ways to defraud carbon-trading schemes that the Interpol Environmental Crime Programme published a Guide to Carbon Trading Crime. It outlines fraud risks like the manipulation of carbon measurements, the sale of carbon credits that belong to someone else, misleading claims about environmental benefits, the risk of hacking to steal carbon credits and personal information, and the risk of securities and tax fraud.
These aren’t hypothetical problems. These are all real issues that Interpol dealt with as a result of Europe’s carbon market.
For example, a hacking attack in November 2010 resulted in 1.6 million carbon credits, valued at €23.5 million, being stolen from the Romanian registry account of Holcim Ltd., the world’s second-largest cement maker. Only 600,000 of those credits were returned.
Carbon markets have also been used to establish Ponzi schemes. In one example from 2000, a carbon trader using the Californian pollution-trading program used false invoices and sales documents to attract investors. Old investors were repaid by recruiting new investors, and the Ponzi resulted in a $50-80 million claim against the trader.
These are the problems with the kind of plan that Kathleen Wynne is bringing to Ontario. A plan that she never once mentioned in her election campaign, and which our province cannot afford. Taxpayers should stand up and call for an end to Kathleen Wynne’s carbon-tax grab.