Kathleen Wynne says cap-and-trade plan to increase gas prices by 4.3 cents a litre

Gas prices in Ontario will rise about 4.3 cents a litreand residential natural gas bills will go up about $5 a month under
the Liberal government's cap-and-trade plan.

Premier Kathleen Wynne said she expects the program won'tincrease electricity costs for the industrial and commercialsectors. She revealed economic impactsWednesday, a day before hergovernment introduces its budget, which is expected to include moredetails about carbon pricing.

"The cost of doing nothing is much, much higher than the cost ofgoing forward and reducing greenhouse gas emissions," she said.

However, revenue from the cap-and-trade auction set for next yearwill be used to "protect" consumers from an electricity rate hikeand could even lead to rates going down, Wynne said.

Retrofitting and conservation programs could also be used tooffset increases in natural gas bills, she said.

Green Party of Ontario leader Mike Schreiner said large emittersshould not be given a "free ride" through temporary relief ascap-and-trade is implemented.

It is scheduled to take effect in January and the governmentexpects to raise about $1.3 billion in its first fullyearofoperation, money that will be devoted to lowering greenhouse gasemissions.

Finance Minister Charles Sousa deniedWednesdaythatcap-and-trade revenue would be used to lower the $7.5-billion
deficit, which the Liberals have promised to eliminate by 2017-18.

"It is not about reducing the deficit, it's about reinvesting toensure that we meet the targets through the Western ClimateInitiative," he said.

However, the revenues still have to show up on the government'sbalance sheet as with the proceeds of the government's initialpublic offering of Hydro One.

The province's fall economic statement showed a 2015-16 deficitprojection that was $1 billion lower than was forecast in lastyear's budget, and much of the drop was due to IPO revenue on thebooks.

The Liberal government has promised to dedicate the proceeds ofasset sales, such as the Hydro One IPO, to the Trillium Trust, tofund their pledge of spending $134 billion over 10 years oninfrastructure.