The cost of carbon pricing in Ontario and Alberta

Categories: Big picture
Published on: January 9, 2017

Maclean’s / Trevor Tombe, Nicholas Rivers / 04 January 2017

Claims that carbon pricing will lead to skyrocketing price increases throughout the economy are misplaced at best — and misleading at worst.

On January 1, Ontario and Alberta adopted broad-based carbon pricing policies. Alberta opted for a carbon tax while Ontario chose a cap-and-trade system. Alberta’s carbon tax is $20/t of carbon dioxide in 2017, while permits in Ontario’s cap and trade system currently trade at about $18/t of carbon dioxide. The idea behind these policies is to better align the prices of goods that cause greenhouse gas emissions with the social costs of producing those goods. The expectation is that, as the price of emissions increases, firms and individuals will emit less. However, many share an important concern that the policies will increase prices of goods for households, and reduce their standard of living.