Sustainable Prosperity Welcomes Ontario Cap-and-Trade Announcement

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

Toronto, April 13, 2015 - Sustainable Prosperity, welcomes the announcement today that the province of Ontario will be moving forward to create a cap-and-trade system on its greenhouse gas emissions, and linking to Quebec existing systems.

“Ontario’s commitment to addressing carbon pollution is an important milestone during what is sure to be a critical year for climate action” said Mike Wilson, Sustainable Prosperity’s Executive Director. “We are very encouraged by the fact that provinces across the country are moving forward to address the issue and so positioning themselves to prosper in a low-carbon global economy”.

Sustainable Prosperity, a national research and policy network at the University of Ottawa and focused on market-based approaches to build a greener economy (SP) has carried out considerable research on climate change policy since its creation in 2008, in particular around the role that market-based instruments can play. That body(external link) of evidence shows that using market based instruments – like a cap-and-trade system – can deliver the necessary environmental outcomes with greater economic efficiency than traditional regulatory approaches. In other words, Ontario’s choice to pursue a cap-and-trade system represents the current best practice in achieving greenhouse gas reductions.

Also evident from SP’s research(external link) is that the linking of cap-and-trade systems across jurisdictions can yield considerable benefits to the participants. The “gains from trade” that linking allows come in the form of greater opportunities to achieve and access low-cost reductions because of the larger market, and ultimately a lower price for emission allowances.

“By linking its cap-and-trade system to Quebec (and eventually to California, since the Quebec system is linked to California’s already), Ontario is ensuring business the broadest possible market for emission reductions opportunities, which will help those businesses both achieve reductions at the lowest possible price and help them sell their emission allowances to a greater pool of willing buyers” explained Alexander Wood, SP’s Senior Director of Policy and Markets.

At the same time, important details of the system are still being worked out. The choices made on how the cap-and-trade system is designed will have a direct bearing on the system’s efficiency and effectiveness. SP has provided the Ontario with its advice(external link) on best practices on these issues as part of its response to the province’s “Climate Change Discussion Paper”.

About Sustainable Prosperity

Made up of business, environment, policy and academic leaders Sustainable Prosperity is a national green economy think tank/do tank. We harness leading-edge thinking to advance innovation in policy and markets in the pursuit of a greener, more competitive Canadian economy. At the same time, we actively help broker real-world solutions by bringing public and private sector decision-makers to the table with expert researchers to both design and apply innovative policies and programs.


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Jennifer Wesanko

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About the Project

The goal of this project is to shed light on the relationship between economic activity and the environment by exploring the linkages between changes in our natural capital and our measures of productivity generally, and through the construction of an environmentally adjusted measure of productivity specifically.

While it is now commonly accepted that economic activity and the state of our environment are linked, many economic measures still fail to incorporate the environment – both the things we draw from it and the pollution we release into it. By developing and calculating measures of productivity that include natural capital, Canada may be able to better understand these linkages. This, in turn, may lead to the identification of strategies that can help Canada become more efficient and innovative in the use and protection of natural capital, and thus more productive and more prosperous.

Using the forestry sector as a case study, this project aims to construct an environmentally adjusted measure of multifactor productivity. In doing so, we aim to add another layer of understanding to the environmental and economic performance of this sector. The proposed measure will have relevance to the Canadian economy as a whole.