Canada: Ontario’s Climate Change Discussion Paper, 2015 – What’s In It And Where Will It Lead?

Last Updated: April 2 2015
Article by Alex MacWilliam and John Goetz

The Ontario Ministry of the Environment and Climate Change released Ontario's Climate Change Discussion Paper, 2015 in February 2015 . The purpose of the Discussion Paper is to elicit feedback from the people of Ontario. In person consultations are taking place with First Nations and Métis communities and in cities across the province. Written comments on the Discussion Paper must be submitted by March 29, 2015. The compressed consultation period means  affected stakeholders need to act quickly to ensure  their comments and concerns are considered.

The Discussion Paper is broader in scope than the previous climate change discussion paper released by the Ministry in January 2013. The new Discussion Paper expands the focus beyond regulating large industrial emitters, to building on initiatives to address emissions from transportation, buildings, agriculture and waste. The paper also addresses adaptation and resilience considerations.

Ten Guiding Principles for achieving a low carbon economy are spelled out in the Discussion Paper, including quick action to achieve results, leadership, best practices and knowledge sharing, supporting new technologies and innovation, integrating environmental and economic considerations, exploring market based instruments, climate-smart infrastructure, collaboration and ongoing communication of risk assessment, targets and progress.

The Discussion Paper points to the leadership role that China, India and the European Union are taking in investing in a low carbon future and states that Ontario needs to do the same to fulfill its guiding principles of leadership, best practices and knowledge sharing and supporting new technologies and innovation.

To reach Ontario's targets of 15 percent GHG emission reductions (below 1990 levels) by 2020 and 80 percent by 2050, the Discussion Paper identifies four climate-critical policy areas as essential to transitioning to a low-carbon society.  First among these is establishing a price on carbon to send a signal to Ontario's economy that will motivate emission reductions and innovation. Second is to take action in key sectors to strengthen conservation and improve efficiency in transportation, industry, buildings, agriculture and waste by implementing the province's existing Conservation First policy and building on other climate-critical initiatives. Third is to support science, research and technology as a driver of economic growth and a pathway to long term transformation. Fourth is to promote climate resilience and risk management in key areas with key partners through practices such as integrating climate change resilience and adaptation considerations into key infrastructure and asset planning decisions.

Of the four climate-critical policies discussed above, it is interesting to note that the Discussion Paper makes the statement that "A well-designed carbon pricing system is the most cost-effective approach to reducing greenhouse gas emissions." This appears to be an endorsement of this policy, potentially over other policies, although this may not have been intended. The Discussion Paper includes a discussion of the various mechanisms for pricing carbon, including a cap and trade system (Quebec, California, RGGI, EUTS), an intensity-based baseline and credit system (Alberta), a carbon tax (British Columbia) and regulations and performance standards (Canada's Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations). The discussion of regulation and performance standards contemplates market-based approaches like cap and trade being part of the program to help emitters meet standards with increased flexibility and lower costs.

It is encouraging that the Discussion Paper examines a variety of approaches to tackle GHG emissions and does not propose using a single mechanism, such as regulating large emitters, to solve Ontario's emission issues. This is reflective of Ontario's diverse emissions sources and the fact that the transportation sector is responsible for a third of its GHG emissions. It is not widely thought that cap and trade alone is an effective policy for reducing transportation emissions. It is also encouraging that the Discussion Paper advocates the building of climate resilient infrastructure, institutions and natural systems that can absorb and adapt to the stresses of a rapidly changing climate. Adaptation to climate change has historically not been given the amount of attention it likely deserves, but increasingly severe weather and resulting damage in the hundreds of millions of dollars is raising its priority level. Lastly, it is encouraging to see that immediate and quick action is being prioritized as one of the Guiding Principles. Many jurisdictions have set medium and long-term targets that they are not on track to reach due to inadequate short-term action.

The Summary section of the Discussion Paper states that Ontario will confirm the market mechanism(s) that will be used to price carbon this spring. This seems to imply that a price on carbon in Ontario is imminent and that it is just a matter of what mechanism(s) will be used to establish it. The comments received from the consultation sessions to date seem to indicate broad (but not unanimous) acceptance of a price on carbon, with some debate as to what the best mechanism is. If Ontario implements a carbon pricing mechanism, it will be interesting to see how Ontario's price compares with that of other jurisdictions such as British Columbia ($30/tonne carbon tax) and Alberta ($15.00/tonne Technology Fund contribution). Alberta's price per tonne of CO2e emitted is actually considerably less than $15.00 as it only applies to the 12% emissions reduction target for large emitters and not to 100% of a facility's emissions.

If Ontario moves beyond its Discussion Paper to create and implement its long-term climate change strategy and 5-year action plan by establishing new regulations and incentive programs, it will do more than maintain its current leadership position on the climate change front in Canada and North America. Depending upon the stringency and extent of the regulations, Ontario may also influence and even pressure other jurisdictions within Canada (and perhaps even Canada's federal government) to put similar programs in place. Ontario is the most  populous province in Canada with 13.7 million people. This is analogous to being the fifth most populous state in the US – just behind New York and ahead of Illinois. Ontario accounts for approximately 36 percent of Canada's GDP, which in turn is  slightly smaller than California's – the ninth  largest economy in the world. Ontario's  annual GHG emissions of 168 million tonnes are at a level that is almost 40 percent of California's. If Ontario was to join California and Quebec and adopt the Western Climate Initiative (WCI) cap and trade program as its mechanism for pricing carbon, it would add significant size to the WCI emissions trading market. It would almost certainly provide momentum to the adoption of that program by other jurisdictions in Canada and the US. It is uncertain at this time whether Ontario will move in that direction but, should it do so, it would increase the likelihood of other Canadian and US jurisdictions linking their respective emissions schemes to WCI.

The tone of the Discussion Paper implies that Ontario is intent on being a leader in addressing climate change and sees this as an opportunity to develop technologies, products and services essential to a carbon neutral economy. This is similar to California's view, but different than that of other governments. The governments of Canada and Alberta have both shied away from taking a further lead on climate change regulation. Both have commented that they do not want to take further steps to regulate GHG emissions without similar actions being taken by the American government. This position is based on the rationale that imposing an additional cost on industry would make existing Canadian industries and economies less competitive. This concern about reduced competiveness appears to be paramount over concerns about the impacts and costs of climate change. Ontario appears to be taking a longer term view that transitioning to a low-carbon economy quickly is essential to the province's long-term growth, sustainability and prosperity.

It will be interesting to see how many of the concepts contained in the Discussion Paper end up being implemented. Although Ontario passed The Environmental Protection Amendment Act (Greenhouse Gas Emissions Trading), which gave the government the ability to introduce regulations for a cap and trade program in 2009, it has to date not followed through with such a program. There is no question that the process of integrating the interests of existing industry and stakeholders with the goals of an ambitious GHG reduction and adaptation program will not be easy. There has been an abundance of ambitious starts and stops at the federal, provincial and state levels in North America which evidence how difficult it can be to successfully implement an emission reduction program. Many eyes will be on Ontario to see if it can succeed.

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