The Government of Ontario has released its Five Year Climate Change Action Plan.  Ontario has decided to pursue aggressive greenhouse gas (GHG) reduction targets:

  • 2020 – 15%
  • 2030 – 37%
  • 2050 – 80%

The cornerstone of the government’s approach is its decision to adopt a cap-and-trade system, specifically in partnership with California and Quebec through the Western Climate Initiative (WCI).  Cap-and-trade is a government mandated system for controlling pollution by providing economic incentives for achieving reductions in the emissions of pollutants.  Ontario’s Action Plan provides a rationale for this approach, as opposed to the carbon tax approach being pursued by governments in Alberta and British Columbia.

Cap and trade will require the purchase of allowances commensurate with the emission of greenhouse gasses, which in turn will provide revenue to the government.  Ontario’s Action Plan provides details on how those funds will be spent over the next five years.

For the first four years, large industry will be required to purchase few, if any, allowances to offset carbon emissions.  Post 2020 it is not yet clear how this will change.  The uncertainty this is creating, particularly for capital planning by large final emitters, will need to be addressed by the government quickly.

Individuals and most small and medium sized businesses will provide the vast majority of the estimated $1.9 billion in annual revenue, principally through increased costs for transportation fuels and natural gas.  The government’s plan depends on using this revenue across a broad spectrum of initiatives  in order to meet future GHG emission targets.

The government’s GHG targets are very ambitious.  However, in the near term, the increased cost of carbon from the government’s plan is not expected to be high enough to have a significant impact on consumption behavior (4.3 cents/L for gas is well within weekend fluctuations).  Therefore the effectiveness of these action items, on a dollar per tonne bases, will be absolutely essential if the government is to have any hope of meetings its targets.

Generating this revenue will obviously be a first priority.  The government intends to conduct its own auction in 2017 for emissions credits and formally join WCI in 2018.  With recent developments in the last WCI auction, where revenues fell far short of expectations, we are sure there will be a few sleepless nights at Finance and Treasury Board.

There are over 75 actions in the plan.  A number of the items will require significant additional work and clarification.  Two items of specific note are:

  • This summer the government will be consulting on the delivery model for providing transitional allowances to industry.
  • The government intends to establish a green bank, based on the Efficiency Vermont and the New York Green Bank, to deploy and finance readily available low-carbon technologies.  The green bank will also design and deliver programs and services to reduce GHGs and will help large and small emitters improve energy productivity and modernize.  Understanding exactly how this bank will work and how your business will interact with it may well determine your ability to access such programs and funds.

The Action Plan provides details in nine action areas:

Transportation – lower carbon fuels, incentives for electric vehicles, low-carbon trucks/buses and the infrastructure needed for refueling and mass transit

Buildings and Homes – supporting energy efficiency improvements, changes to the Building Code for 2030 for new net zero buildings and renewable content requirements for natural gas

Land Use Planning – support climate change policies in municipal land-use planning and  support the development and implementation of implement Transportation Demand Management Plans

Industry and Business – help businesses to modernize and adopt low-carbon technologies

Collaboration with Indigenous Communities – connect remote communities to the grid, a fund for community level planning and projects

Research and Development – set tax and regulatory policies that encourage innovation, establish and Global Centre for Low Carbon Mobility and encourage the development and growth of the  clean-tech sector by supporting , accelerators and clusters in sectors where Ontario has a competitive edge, support proof-of-concept projects for low carbon technologies and help emerging low-carbon companies increase scale

Government – retrofit of government buildings, telecommuting and more efficient vehicle fleet

Agriculture, Forests and Lands – implement Waste Free Ontario legislation, maximize carbon storage from agriculture and update environmental assessments to account for climate change

Implementation – annual reporting to the public and Legislature on actions in the Action Plan, plan for adapting to climate change in 2017

This Action Plan represents one of the most bold and aggressive agenda’s for the Ontario Government over the next few years.  Successful implementation, working with businesses and others, will be paramount for reducing GHG’s but as a signature policy for the Wynne Liberals their reelection hopes may well ride on how the public accepts paying for all of this change over the next two years.

Download the Action Plan.