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Ont. Tory government could get carbon cash tax despite opposition, experts say

With all four Ontario Progressive Conservative leadership hopefuls trashing the notion of a carbon tax, experts say a PC government would be forced to comply with federal carbon pricing rules regardless, and that carbon tax revenue could help fund key campaign promises

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TORONTO—All four candidates hoping to lead Ontario’s Progressive Conservatives have rejected the idea of a carbon tax, but experts say a Tory government could end up with revenue from the measure anyway thanks to proposed federal requirements.

The carbon tax, a key pillar in ousted leader Patrick Brown’s party platform announced in November, would fund major campaign promises ahead of a spring election, including a 22.5 per cent income tax cut.

But those vying to take Brown’s place have scrapped the idea of the tax, which was to replace the governing Liberals’ cap-and-trade system, with some even threatening to take Ottawa to court if it imposed carbon pricing on provinces.

Experts say, however, that it’s possible the Tories, for all their rhetoric, may still end up with the tax proceeds if they were to form government in June.

“Whether they fight the federal government or not, that carbon tax is going to happen,” said Trevor Tombe, an economist with the University of Calgary who has been watching the heated race closely.

“Then the feds will return the money to the Ontario government. So basically all of the budgeting that’s currently in the People’s Guarantee (party platform) can be maintained.”

Tombe suggested the leadership candidates are publicly railing against the carbon tax while fully aware they could likely reap its rewards. A court challenge over the matter, he added, is unrealistic.

“The federal government has jurisdiction to implement these kind of measures as it sees fit,” he said. “It has near-unlimited taxing power.”

A spokeswoman for Environment Minister Catherine McKenna said the federal government has not decided how it will pass the proceeds of a carbon tax back to the provinces, but acknowledged it had options.

“The draft legislation gives the federal government the flexibility to return the revenues directly to people and companies in the province,” Julia Kilpatrick said.

Allan Maslove, a public policy professor at Carleton University, said it’s unlikely the federal government will go around a provincial Tory government even if it openly challenges the carbon tax.

“I think the political fallout from that would be too hard for them to take,” he said.

Instead, Maslove said, Ottawa could create a system under which provinces that aren’t willing carbon-pricing participants have to deal with less desirable conditions—and potentially less money—than if they had their own carbon tax or cap-and-trade regime.

Jean-Thomas Bernard, a University of Ottawa economics professor, said it would be “awkward” for a Tory government to accept carbon-tax cash from Ottawa while also being opposed to the measure.

Ontario’s Liberals, who have raised nearly $2.5 billion since introducing their cap-and-trade system last year, have attacked the Tories for not coming clean on how they would pay for their campaign promises without a carbon tax.

“That’s a massive hole in their plan,” said Liberal campaign co-chair Deb Matthews. “I think if they were being truthful with the people of the province they would acknowledge that that is a hole and it’s not good enough to say they’d find it through efficiencies.”

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