The government of Ontario passed its climate strategy legislation May 18, laying the foundation for the province to join "the biggest carbon market in North America," and setting out the principles under which the proceeds from revenue from pricing carbon is recycled into the provincial economy. On June 8, the legislation was followed by the government’s Climate Action Plan, described as one of the most ambitious environmental programs in Canadian history.
Under the Climate Change Mitigation and Low-Carbon Economy Act, money raised from Ontario's cap and trade program will be deposited into a new Greenhouse Gas Reduction Account. The account is to invest every dollar in green projects and initiatives that reduce emissions.
Section 71, dealing with the account, allows funds from the account to be used for costs incurred in connection with the administration and enforcement of the Act, costs related to initiatives "that are reasonably likely to reduce, or support the reduction of, greenhouse gas," and reimbursement of the Crown for expenditures related to the initiative. Disbursement of any such funds will require the Minister to evaluate the initiative before the Treasury Board, including
(a) the potential greenhouse gas reductions of the initiative;
(b) the relationship of the initiative to the achievement of the greenhouse gas emission reduction targets established under section 6;
(c) the relationship of the initiative to other potential, planned and funded initiatives to reduce greenhouse gas;
(d) the relationship of the initiative to the climate change action plan prepared under section 7;
(e) whether the initiative is also likely to assist low-income households and vulnerable communities with their transition to a low-carbon economy; and
(f) such other matters as the Minister considers appropriate.
Following extensive consultation with industry and other groups, the government says, the legislation was strengthened by requiring “enhanced accountability” and public reporting on the province's Climate Change Action Plan and investment of cap and trade proceeds.
Ontario also posted its final cap and trade regulation soon after passage of the legislation. The regulation covers detailed rules and obligations for businesses participating in the program. The final design was also informed by extensive consultation with businesses, industry, the public, environmental organizations and Indigenous communities.
The Greenhouse Gas Reduction Account will receive proceeds from auctioning allowances under Ontario’s cap and trade program. The first auction will be held in March 2017.
Ontario intends to link its cap and trade program with Quebec and California.
The debate continues
Arguments for and against various aspects of Ontario's climate strategy have continued to sprout in public discourse, even though the strategy itself has been intensively debated in cabinet since the beginning of the year. A May 25 open letter to Premier Kathleen Wynne by Timothy Egan, President & CEO Canadian Gas Association, is the most recent as this publication goes to press. The Action Plan's "agenda to move homes, businesses and other buildings off of natural gas... is incredibly irresponsible," he says. It "arbitrarily restricts the freedom of more than 3.5 million Ontario homes, businesses and industrial facilities" in their choice of energy source for space heat, hot water and other services, a choice that currently represents over 35 per cent of Ontario’s end-use energy needs. It will result in an increase in energy space heating costs by up to $3,000 per year, the CGA calculates. And it will undermine the resilience of the energy system, he charges.
In a statement May 26, Premier Wynne said, "I have no intention to force people off natural gas. In fact, one of the initiatives under Ontario's historic infrastructure investment extends natural gas lines to rural and northern communities to support economic development." An official announcement the same day reiterated Premier Wynne's words, adding that the government would invest $100 million in cap and trade proceeds over four years to help develop Ontario's renewable natural gas resources, in the form of methane from sources such as landfills, green bins or livestock.
"Ontario committed to creating a $200 million Natural Gas Access Loan and a $30 million Natural Gas Economic Development Grant to help more communities that previously lacked the necessary infrastructure to switch" to the cleaner fuel source, the announcement said.
A day earlier, the Ontario government also announced that as part of its climate strategy it would invest $900 million over four years from cap and trade revenue to help make rental and social housing more energy efficient.
A news report on CBC Radio went on to say that while the province is looking to shift businesses away from fossil fuels, there is no plan to ban natural gas. But see the blog post from Stikeman's Canadian Energy Law, elsewhere this issue.
Earlier, an April 13 opinion piece in the Toronto Star by Keith Brooks argued that merely putting a price on carbon, as BC has done, is insufficient – unless that price is set at $100 – $200 per tonne of CO2 equivalent. BC's price started at $10/tonne, rising to its planned final price in 2012 of $30. All of the revenue is returned to BC residents in the form of tax rebates. Without a high enough price, he argues, Ontario's strategy of redirecting some of the revenue into suitably targeted initiatives designed to reduce emissions (in his commentary he does not specify which ones) is the necessary approach.
Ontario's legislation sets the beginning price at around $18.
In response to Mr. Brooks, Mark Cameron at cleanprosperity.ca, in an opinion piece April 19, counters that BC's tax and dividend scheme, as it's generally known to analysts, has in fact been close to optimally successful in reducing emissions. "[W]ith the exception of sensible regulations that can be brought in at low cost and help reduce emissions and energy use – better building standards for example – for the most part, trying to reduce greenhouse gases through other subsidies or regulations costs more per tonne of carbon emissions reduced than carbon pricing," he argues. "[L]et’s not be satisfied with a low, hidden carbon price in the form of cap and trade, with the revenues being spent on subsidies for a few chosen projects and technologies. Instead, let’s accept that carbon prices high enough to drive emissions reductions, but give people the means to pay for it and adopt new technologies by putting money back into everybody’s pockets."
There is little doubt this issue will remain on the public agenda for years to come.