Written by Mike Barrett and Thomas McInerney
The Globe and Mail published details of a proposed 57-paged comprehensive plan by the Ontario government to address climate change by significantly reducing the province’s carbon footprint. The plan, entitled Ontario’s Climate Change Action Plan, has apparently been hotly debated in cabinet and is scheduled to be officially released in June. The government has not denied, nor confirmed, the details in the leaked document.
Ontario has previously announced the following greenhouse gas emissions reductions targets: 15 percent below 1990 levels by 2020; 37 percent below 1990 levels by 2030, and 80 percent below 1990 levels by 2050.
The Climate Change Action Plan is reported to include an aggregate commitment by the government to spend over $7 billion over the next four years, including:
- $3.8 billion to retrofit buildings, including funding to replace natural gas heating with geothermal, solar power and other forms of electricity-based heating. A new government agency—modelled after the Green Bank established by New York state—is proposed to be created to administer the financing of solar and geothermal projects.
Currently, 76 percent of Ontario homes rely on natural gas for heating. In addition to retrofitting existing homes, the plan would require, through changes to the building codes, that all new homes built in Ontario in 2030 or later to be heated without the use of any fossil fuel. This initiative is intended to be expanded to all Ontario-based buildings prior to 2050.
Not surprisingly, the natural gas suppliers in and to Ontario have expressed some concern with the proposed phase out of natural gas for heating; such concerns focusing on the costs to switch fuel types and the risks associated with reducing heating options. We note the province has recently been exploring improving natural gas infrastructure in remote communities, including announcing a $230 million plan to do so in April, 2015. At first blush, these appear to be inconsistent initiatives and we await the official plan release in June for some clarification.
The Ontario government’s intention to establish a new agency to facilitate solar and geothermal adoption is a function that may be able to be handled by the existing Independent Electricity System Operator—an entity generally regarded as part of the Ministry of Energy. There have been reported frictions between the Ministry of Energy and Ministry of the Environment and Climate Change over control of this role.
- $285 million earmarked for programs to incent electric vehicle (EV) adoption. The government purportedly has set EV adoption targets of 5 percent of all vehicles sold by 2020, 12 percent by 2025 and at least one EV or hybrid vehicle in every multivehicle driveway by 2024—a total of 1.7 million vehicles. In order to meet such targets, the Ontario government will initiate the following:
- a rebate of up to $14,000/EV;
- an extra rebate (amount not yet determined) for low and moderate income households who replace older vehicles with an EV;
- free electricity during overnight hours to charge EVs; and
- a rebate of up to $1,000 to install home charging.
We note the 2025 12 percent adoption target represents a greater than 20X increase in the number of EVs sold in Ontario since 2000.
- $280 million to facilitate the adoption of EV buses by school boards and the adoption of lower carbon emitting trucks by trucking companies.
- $354 million to expand the GO rail network to service more Ontario communities.
- $176 million in incentives for fuel retailers to sell increased amounts of biodiesel and 85 percent ethanol blend. In conjunction with these incentives, the Ontario government in proposing to regulate that all liquid transportation fuels lower their life-cycle carbon emissions by 5 percent by 2020.
- $1.2 billion to help industrial businesses reduce GHG emissions.
The $7 billion in aggregate spending on climate change initiatives is intended to be generated by the province’s cap-and-trade plan (i.e., by auctioning emission allowances), which is expected to generate approximately $1.8 billion per year.
We will confirm the details of Ontario’s Climate Change Action Plan upon its official release. If you have any questions concerning any of the proposed features of the Ontario Climate Change Action Plan, we would be pleased to discuss them with you.