Like a carbon tax, but much worse
If you want to put a tax on greenhouse gas emissions, there’s an easy way to do it. You implement a carbon tax, like British Columbia did, and add it to the price of gasoline and other fossil fuels. The higher the emissions, the more tax people pay. Anyone can understand how it works.
Then there’s a second way, which is much more complicated and expensive. It requires a big bureaucracy to administer and is highly vulnerable to special interests. Lots can go wrong. In Europe, where they’ve been trying to get it right for a decade, it’s been an abject failure. This system is called cap and trade, and nobody but the experts can understand how it works.
Kathleen Wynne’s Ontario has chosen the second way. The fact that cap-and-trade schemes are incredibly opaque is considered a feature, not a bug. The government can swear it’s not a tax, even though the taxpayers will wind up paying for it anyway as industry passes on the extra cost.
Cap-and-trade schemes are supposed to encourage companies to find cleaner forms of energy. A cap is set on the amount of pollution each industry is allowed to emit. Individual businesses are then granted (or sold) permits to pollute. They can then buy or sell these permits on the open market. If they want to emit more pollution, they have to buy more permits, and vice versa. Finance people love carbon markets because there’s good money in it for them. (Source: Margaret Wente, Globe & Mail)