On June 8, 2016, the Ontario government (Government) released a five-year Climate Change Action Plan (Action Plan), which builds on the Government’s Climate Change Strategy released in November 2015, that set the long-term vision for meeting greenhouse gas (GHG) emissions reduction targets. The Action Plan outlines the key actions the Government will take to combat climate change at a cost of C$5.9-billion to C$8.3-billion. It acknowledges that there is a need to maintain a competitive economy while achieving environmental results — this will be the Government’s biggest challenge as it attempts to “up the ante” in its climate change fight. It is noteworthy that until the Government passes laws to implement the various proposals, the Action Plan will have no legal effect.

The Action Plan states that the Government is seeking to build on Ontario’s new climate change legislation and to ensure the proceeds of cap-and-trade system (estimated to be C$1.8-billion per year) are invested into green projects. For further details of the new legislative measures, please see our May 2016 Blakes Bulletin: Ontario Announces Significant Climate Change, Cap-and-Trade, GHG Emissions Legislative Developments and the new Government website for the cap-and-trade regime, which outlines the dates of the cap-and-trade training sessions, led by the Ministry of the Environment and Climate Change, and the important 2016 and 2017 registration and submission deadlines.

WHAT DOES THE ACTION PLAN ADDRESS?

The 86-page Action Plan outlines the Government’s intention to:

  • Establish a “green bank” to help homeowners and businesses access energy-efficient technologies to reduce GHG emissions from buildings
  • Create a cleaner transportation system
  • Stop the increase of emissions from buildings
  • Encourage installation and retrofit of clean energy systems (solar, battery storage, insulation and heat pumps) for homeowners and businesses
  • Support a carbon market
  • Work in partnership with First Nations and Metis communities to address climate change
  • Make the Government carbon neutral by 2018
  • Focus on sustainable agriculture and forestry and tackle GHG pollution from the waste sector

ACTION PLAN HIGHLIGHTS

No Ban on Natural Gas

Contrary to the leaked reports of the draft Action Plan in May, there is no ban on natural gas for heating. However, the Government will seek to help homeowners reduce their carbon footprints by supporting additional choice. The Government intends to help homeowners purchase and install low-carbon energy technologies such as geothermal or air-source heat pumps, solar thermal and solar energy generation. Fiscal incentives will also be introduced to encourage net zero carbon homes. All of these measures will reduce the reliance on the use of natural gas for heating.

Softening the Impact of the Cap-and-Trade Program

The Action Plan states that the Government will work to reduce the impact of the cap-and-trade program on low-income households and vulnerable communities. The Government intends to keep electricity rates affordable through the use of cap-and-trade proceeds to offset the cost of GHG reduction initiatives that are currently funded by residential and industrial consumers through their electricity bills. Between C$1-billion and C$1.32-billion will be allocated to this action, with a start date of 2017.

The Government intends to help business and industry manage the impacts of cap-and-trade by supporting significant emission reductions by providing funds to offset the cost of low-carbon technologies, support research and development (R&D) and provide allowances to industry to help them transition to lower carbon technology while they reduce GHG pollution. These actions to facilitate the transition to a carbon priced economy are laudable but the Government must be careful to not dilute the effectiveness of the cap-and-trade program by the provision of too many free allowances or offset credits. The EU Emission Trading System was significantly impacted by the import of international offset credits and the high availability of allowances resulting in a low carbon price and a weaker incentive to reduce emissions.

The Green Bank — Not a Real Bank

The Government intends to introduce a “green bank” to deploy and finance readily available low-carbon energy technologies. The intended Greenhouse Gas Reduction Account funding for this initiative is between C$875-million and C$1.1-billion, with a start date of 2018. The green bank is intended to help households understand government grants and incentives and to provide households with assistance to secure flexible low-interest financing to help pay for GHG reducing energy improvements in their homes. It will also support large commercial and industrial projects, or projects that require scale to be financed privately, by working with commercial banks to help aggregate projects to reduce risk. The green bank would appear to be an advisory body rather than a typical lending institution.

Transportation

More than 33 per cent of Ontario’s GHG pollution is caused by the transportation sector. The Action Plan establishes an electric and hydrogen passenger vehicles sales target of five per cent in 2020 (in 2015, five per cent of the number of cars sold was 14,000). A number of initiatives are going to be introduced to increase the use of electric vehicles. Ontario will work with the federal government to eliminate the harmonized sales tax on zero-emission vehicles and to increase access to infrastructure for charging electric vehicles. The Government also intends to accelerate the deployment of the regional express rail system (between C$355-million and C$675-million has been allocated to this rail initiative).

R&D Tax and Regulatory Policies

Tax and regulatory policies will be introduced to encourage innovations, including: R&D tax credits; potentially accelerated capital cost allowances for technologies that reduce GHG pollution; and the broadly framed comment that regulatory requirements will be updated to support the adoption of innovative industrial technologies.

Environmental Assessments

A draft guide for projects, titled Consideration of Climate Change in Environmental Assessment in Ontario, and undertakings under the Environmental Assessment Act, describe various approaches to the treatment of climate change in environmental assessment procedures and studies. This guide will become part of the environmental assessment programs guides and codes of practice.

Annual Updates

The Government will produce a publicly available annual report that describes the status of the actions set out in the Action Plan.

WHERE ARE THE OPPORTUNITIES?

This plan, if fully implemented, will result in large transportation projects; considerable opportunities for clean energy system developers and contractors; significant R&D projects; encouragement of new technologies in the agriculture, forestry and waste sectors and significant opportunities for advisors. The Action Plan states that the Ontario environmental and clean technology sector is made up of approximately 3,000 firms employing 65,000 people and is estimated to be worth C$8-billion in annual revenue and C$1-billion in export earnings. There is no doubt that this sector will grow considerably if the Action Plan is implemented.

At the recent Blakes-sponsored National Energy Roundtable conference in Toronto, there was considerable debate regarding the merits of Ontario’s cap-and-trade regime as opposed to a carbon tax, but there was overwhelming support for the implementation of new measures to tackle climate change. Ontario has significant expertise in this sector.

It remains to be seen how aggressively the Government will push forward with the proposals set out in the Action Plan. It will be interesting to see in the 2017 Action Plan annual report if real progress has been made in Ontario’s fight against climate change.