Ontario’s new climate plan needs bigger sticks, more carrots

This week, the Ontario government released its five-year Climate Change Action Plan, which includes 28 initiatives designed to gradually electrify the transportation system, improve building efficiency, and ultimately reduce Ontario’s emissions of greenhouse gases.

The plan has been met with praise from think tanks, environmental groups and news organizations who view it as an ambitious strategy to support lower-emitting choices in key sectors.

On the other hand, skeptics highlight the potential harm to consumers and businesses from rising energy and transportation costs.

Let’s take a closer look at how the plan really stacks up.

The good: Ontario is leading the way

Ontario’s new plan is ground-breaking in several ways.

First, unlike BC’s revenue-neutral carbon tax, Ontario will reinvest all revenues from its previously-announced cap-and-trade system into green policies.

The cap-and-trade system is expected to generate up to $1.9 billion per year, which will be used to foot the new climate plan’s $8.3 billion bill.

Second, the plan aggressively targets the biggest source of emissions in the province: transportation.

Vehicles account for 35% of Ontario’s greenhouse gases and the plan contains a variety of policies and investments to get people walking, biking and using public transit more often.

New electric vehicle subsidies in the plan will encourage consumers and businesses to shift towards zero-emissions options. Improved renewable fuel standards will reduce the impact of existing gas-fuelled vehicles.

Third, the plan introduces comprehensive subsidies for building retrofits and introduces stringent new standards for energy efficiency to reduce emissions from homes and businesses.

Among other regulations, new houses will have to be carbon neutral by 2030.

The bad: All carrots, no sticks

Environment Minister Glen Murray declared that the new plan is a “big basket of carrots and no sticks.”

And why not? Incentives are sexy! Electric vehicle subsidies and home retrofitting rebates are easy to sell. Consumers and businesses like free money.

Technically, the Ontario plan does have a stick: the cap-and-trade system. It goes into effect in 2017 and puts a price on carbon emissions from certain sectors.

The problem is the stick isn’t big enough.

The cap-and-trade system will add just 4 cents per litre to the price of gasoline and $5 per month to home heating bills. The estimated carbon price for industry will be just $18 per tonne of CO2 in the first year.

Subsidizing electric heating doesn’t work if it’s still more expensive than natural gas. Rewarding buyers of electric vehicles doesn’t work if cheaper conventional vehicles are still an option.

The new Ontario plan is full of little nudges when a hard stand on fossil fuels is needed.

The ugly: We still have a long way to go

The Ontario government deserves credit for following through on an ambitious, far-reaching climate change program that includes a price on carbon. That’s more than can be said for the federal government, most other provinces, and indeed most jurisdictions around the world. Ontario is undoubtedly a climate policy leader.

Yet Ontario’s new climate plan may not go far enough to reduce emissions on the scale required.

In 2014, Ontario produced 170 megatonnes (Mt) of greenhouse gases. Even if all goes well, Ontario estimates its new climate plan will reduce total greenhouse gas emissions by just 9.8 megatonnes (Mt) in 2020 and 20 Mt in 2030.

To meet Ontario’s emissions targets, the province requires reductions of 14 Mt below 2014 levels by 2020 and 54 Mt below 2014 levels by 2030.*

Ontario expects to make up the shortfall through the cap-and-trade system. In theory, by reducing the economy-wide emissions cap by far enough any target can be met. The biggest question moving forward is whether Ontario is willing to use that stick.

If Ontario is going to meet its longer-term targets and if Canada is going to meet its national climate commitments—let alone the global ambitions laid out in the Paris Agreement—reductions will need to be even deeper.

And it will take more carrots and much bigger sticks to get us there.

Hadrian Mertins-Kirkwood is a CCPA trade and energy researcher. Follow Hadrian on Twitter @hadrianmk.

* Ontario’s climate targets are 15% below 1990 levels by 2020, 37% below 1990 levels by 2030 and 80% below 1990 levels by 2050. According the latest available data, the 1990 baseline is 184 Mt.

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