Ontario and Quebec businesses and consumers are already feeling the pain from rising fuel and energy prices. Yet, Premiers Charest and McGuinty want to make things worse by unleashing a new variation on a carbon tax through a carbon trading emission scheme called cap-and-trade.

The last thing Ontario and Quebec need is another tax; especially one that follows the new fad of protecting 'Mother Earth' when, in practice, carbon taxes do anything but. Canadian already pay substantial carbon taxes. As well, new carbon taxes already exist in most European countries and the experience there reveals just how damaging such programs can be, and how little their effect is on greenhouse gas emissions .

At a recent meeting in Quebec City, Ontario and Quebec cabinet ministers announced, amongst other things, a new plan for an inter-provincial carbon cap-and-trade system to be in place by 2010. Premier McGuinty has no mandate for this new tax. While campaigning last June before last fall's provincial election, he unambiguously promised not to raise the taxes of Ontarions. Cap-and-trade does just that.

What will cap-and-trade mean in practice A cap-and-trade system sets a limit (or cap) for companies on the amount of carbon dioxide they can emit into the atmosphere. Companies who exceed their cap would be charged a hefty penalty (or tax). This creates a market because companies that emit carbon below their cap can trade or sell their excess capacity to companies that emit above their cap.

These new costs and penalties amount to nothing more than a new carbon tax, just dressed up differently. It is the type of program an Enron trader would have concocted. It will still add a substantial new cost to businesses and service providers which will be passed along to consumers - all aimed at the goal of reducing carbon dioxide emissions, as if CO2 is a pollutant, which it is not. CO2 is an inert gas that is vital to plant photosynthesis. People exhale it when they breathe.

Fuel already is highly taxed. In 2008/09 Ontario is projected to collect $4.2 billion in gas taxes and license fees. This is an increase over last year when it collected $4.1 billion. Last year only 53% of this revenue was spent on roads, bridges and highways. This year the spending is projected to fall to 48%. Way back in 2006/0, 67% of provincial gas tax revenues went into roadways. These taxes aren't even being used for their designed purpose, adding weight to the concern that a new carbon tax amounts to a tax grab.

The European Union has in place a cap-and-trade system and some countries apply extra carbon taxes on top of this. Consequences have included massive cost increases and job losses with little or no reduction in carbon emissions. In fact, carbon dioxide emissions have increased in Europe by 5% between 2000-2005, while manufacturing jobs fell by 12% in the Netherlands and 8.4% in France during that same period.

The ill-designed European cap-and-trade scheme has caused increased costs, causes job losses, not seen emissions reductions and suffered from massive fraud. Even with a well-constructed trading emission scheme, one of the main effects will be to transfer emissions from firms operating within the scheme to those that are not. To the extent that such firms are not energy efficient the net impact of trading emissions schemes can be to increase global emissions.

Sir Winston Churchill wrote, "for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle." Struggling Ontario businesses and consumers should counsel the premier to stand by his election promises and drop the carbon tax. Otherwise, the premier will be dumping taxpayers into the Churchillian bucket.