Winners and Losers of Ontario's Climate Plan

Shawn McCarty and Richard Blackwell

Renewable energy companies see tremendous opportunity in Ontario’s climate-change plan, though skeptics question whether the proposed incentives and regulations will achieve the government’s goals and will impose costs that are unacceptable to voters.

The $7-billion plan – outlined in a document leaked to The Globe and Mail – would provide incentives for energy retrofits and fuel switching; change building codes to require energy-efficiency improvements and phase out fossil-fuel use in new homes; and mandate a 5-per-cent reduction in greenhouse gas (GHG) emissions from transportation fuels.

It is meant to complement the Liberal government’s cap-and-trade program, which will impose emission caps on key industrial sectors and allow companies to comply with the regulatory limits by purchasing credits from those that can achieve reductions more efficiently.

Winners would include electric vehicle makers; companies that do building audits and sell energy-efficiency goods and services; biofuel producers; and purveyors of technologies such as heat pumps, solar power and storage technologies that back up renewable sources of electricity.

Ontario has set a goal of reducing GHG emissions by 15 per cent below 1990 levels by 2020, and 37 per cent below that baseline by 2030. The provincial plan – which reflects a similar approach in Quebec – will contribute to Ottawa’s overall effort to forge a national climate strategy and at least meet Canada’s commitment to cut emissions by 30 per cent below 2005 levels by 2030.

“The Ontario plan addresses the most significant source of emissions,” Celine Bak, president of Analytica Advisors, said Tuesday. “It reflects the actions the provinces and the federal government will require to undertake as signatories of the Paris [climate] treaty.”

Prime Minister Justin Trudeau is in the process of ratifying the Paris accord, which pledges the international community to hold the anticipated increase in global temperatures to less than two degrees above preindustrial levels, with a goal of limiting the increase to 1.5 degrees.

John Cook, president of Toronto-based clean-tech investment firm Greenchip Financial Corp., said he was “horrified” at Ontario’s plan because of its top-down approach. It would be much more effective, he said, to put in place a carbon tax, broadly reduce other taxes and then “let the market determine what the economics of these technologies actually are.”

The Ontario approach will actually make it more difficult to get mainstream investors to put money into clean technology, Mr. Cook said. They will hesitate to invest if they think markets “are being controlled from above.” Essentially, Ontario is micromanaging a sector “which should be developing on its own,” he added.

Producers of gasoline and diesel fuel are already facing higher carbon costs as a result of the planned cap-and-trade plan, and worry that an additional burden will make them uncompetitive with U.S. refiners, said Peter Boag, president of the Canadian Fuels Association, which represents refiners and distributors.

The climate plan would include a low-carbon fuel standard that requires distributors of gasoline and diesel to reduce the overall GHG intensity of their fuel mix by 5 per cent. While discouraging the use of natural gas for home heating, the provincial plan would subsidize its use for heavy-duty vehicles to replace diesel fuel.

Mr. Boag said there are few pragmatic options for achieving the targeted emissions, and he noted that British Columbia is getting set to review a similar fuel standard that has failed to generate the expected emissions reductions.

But a spokesman for British Columbia’s Environment Ministry said the province reviewed its program two years ago and concluded the target remains “feasible.”

Clean-tech companies welcome the proposed Ontario plan as a boon to the fledgling sector.

“Our industry is completely primed for this opportunity,” said John Gorman, president of the Canadian Solar Industries Association.

Many large-scale solar projects have been installed in the province over the past few years, thanks to government incentives that gave developers high prices for their power. But with costs – and subsidies – declining, the new climate plan could accelerate installations in smaller systems for houses and industrial buildings, Mr. Gorman said.

“There’s really no amount of solar … that this program can throw at us that the industry wouldn’t be capable of delivering.”

[Click on full story below to go to the original of the above; see also the story below from the Toronto Star]:

Curbing climate change in Ontario will cost you $13 a month: report

By Robert Benzie

Ontario’s new climate-change plan will cost the average household $13 a month — far less than a carbon tax that would have meant a monthly hit of up to $107, according to an internal report on the scheme.

Premier Kathleen Wynne’s cap-and-trade proposal to reduce greenhouse gas emissions, enshrined in legislation expected to pass Wednesday, will drag on the economy by 0.03 per cent in 2020.

Growth forecast to be 11 per cent between 2015 and 2020 will be adjusted downward to 10.97 per cent, having roughly the same effect on the provincial economy as a statutory holiday.

That’s according to a government draft obtained by the Star of the “impact modeling and analysis” of Ontario’s new carbon-pricing program being done along with Quebec and Ontario.  Prepared by EnviroEconomics, which advises governments on the economic effect of environmental policy changes, the report warned a carbon tax on fuels to curb emissions would be more expensive for consumers.

Under Wynne’s plan, gasoline prices will rise by 4.3 cents a litre and the average monthly natural gas bill will jump $5 next year.

“Households will experience some cost increase related to carbon pricing. The average energy costs to households for building energy and transport could rise in the order (of) $13 per month in 2017,” said the EnviroEconomics study.

In all, the system will bring in an additional $1.3 billion annually to the treasury, which, by law, must be spent on environmental initiatives such as retrofitting inefficient buildings and boosting the number of charging stations for electric cars.

But to achieve Ontario’s ambitious targets — cutting greenhouse gas emissions to 15 per cent below 1990 levels by 2020, 37 per cent by 2030, and 80 per cent by 2050 — a carbon tax on fuels would have been even more costly. “With alternative options, household costs could be four to eight times higher,” the EnviroEconomics study said of carbon taxes.

The firm concluded the average household would spend between $48 and $107 more a month if carbon taxes were slapped directly on gasoline and natural gas. Such levies would also have caused a drop in gross domestic product of between 0.21 per cent and 0.4 per cent.

“This gives us the best bang for the buck,” one official said Monday of the cap-and-trade system that discourages carbon emissions through a complicated system of credits.

Businesses will have greenhouse gas limits, or caps, and those coming in under theirs can sell or trade credits. This is to create an economic incentive to pollute less.

An industry’s overall cap will gradually be lowered in order to reduce pollution, which should promote the use of greener energy sources such as wind and solar power in homes and electric cars on roads.

Ontario expects to cut 18.7 megatonnes of greenhouse gas emissions by 2020. (In perspective, the province’s output was 170.2 megatonnes in 2014, lower than the 210.6 megatonnes spewed out in 2005, the reduction thanks mostly to ending coal-fired electricity generation.)

But of that 18.7 megatonnes, EnviroEconomics notes that only 3.8 megatonnes will actually be in Ontario — the rest could be slashed in Quebec and California, though this province would still get credit for the reduction in the three-jurisdiction cap-and-trade program.

The report also found Ontario’s exports would drop by 0.51 per cent in 2020 due to the carbon-pricing, although a straight carbon tax would have triggered a drop of anywhere between 2.5 per cent and 8.4 per cent.

As well, it points out more than 50 different “carbon-intensive” industries, including auto manufacturing, cement, chemicals, forestry, iron and steel, and petroleum, face some risk under the forthcoming regime.

Environment Minister Glen Murray insisted Monday that that’s why the government will have “transitional assistance” to help businesses adjust to the new reality of polluting less.

“There’s nine large emitting industry associations — if you look at the 158 large emitting sites in Ontario — that are going to be reducing, whether it’s a cement factory or steel plant, or refinery,” said Murray.

“We’re working closely with them. We’re actually seeing plans come forward by many industry sectors about how they want to manage it,” he said. “(We) will have several billion dollars over the next four to five years to invest in those plans to help them make that transformation, as they are in Quebec, and as they are in California.”

“Remember, our industries support cap-and-trade over (a carbon) tax . . . because they realize that a market-mechanism system is better than a politically defined system.”

NDP Leader Andrea Horwath said she is worried about the consequences of what Murray is proposing. “We’re concerned about jobs, we’re concerned about everyday people and their ability to afford these kinds of changes,” said Horwath, urging the government to reveal its full plan as soon as possible.

“Some of these changes seem quite substantial.”

Progressive Conservative MPP John Yakabuski (Renfrew-Nipissing-Pembroke) expressed alarm that the Liberal plan could “cripple the economy” and spell “disaster” for Ontario families. “It just doesn’t make any sense. It’s wonderful to be as green as possible, but it has to be plausible. It has to be realistic,” said Yakabuski.

For the original of the above story go to