The Canadian province of Ontario is heading to the polls on June 7th, and the fate of the province’s energy transition hangs in the balance. If the opposition party wins, popular energy efficiency programs could be cut and housing emissions will remain too high, says Niall Williams.
Ontario’s incumbent government has been in power for over 15 years and suffered serious scandals, several of which were related to the provincial electricity system. The Gas Plant Scandal involved the politically motivated cancellation of gas powered electricity generating plants before the election in 2011, at a cost of between $675 and $815 million to the taxpayers and electricity ratepayers.
Another source of controversy involved the surprise announcement of the partial privatization of the provincial electrical transmission and distribution utility, Hydro One, in 2015, shortly after a provincial election in which no mention of a privatization plan was made. The initial sales of the utility came at a time of a significant rises in electrical rates. On peak rates for residential customers rose 28% between November 2014 and November 2016 according to the regulator (Ontario has had time of use pricing for residential customers since 2005).
Rising electricity rates have been a major political problem for the government, and the public blames feed-in tariffs for renewable energy for much of that. (In fact in 2015, wind, solar and biomass generated 18% of the province’s electricity and accounted for 27% of generation and conservation costs.) In 2017, realising that their prospects of reelection were declining, the government announced that it would be taking on debt to reduce electricity prices, which means that taxpayers will be paying interest for a temporary reduction in rates. This may be good politics, but it certainly isn’t good policy.
The result of these decisions, and others, is that current polling shows that 60% of Ontario voters want to see a change in government at the election.
Notwithstanding the bad decisions that may have been made, the government has made some progress on reducing GHG emissions (see Figure 1). Last year, cap and trade legislation was enacted, which has linked the Ontario emissions market to those of California and Quebec to form the Western Climate Initiative, the second largest international emissions trading regime in the world. The proceeds from the past year’s emissions permits are now being reinvested into projects designed to reduce GHG emissions in the province (see Figure 2).
Since electricity generation in Ontario has largely been decarbonized (see my previous post), focus has been directed to transportation and improving the efficiency of the building stock. Significant rebates, worth $300 million, have been offered to homeowners to improve insulation in existing residential buildings and install heat pumps. Attic insulation improvements are receiving rebates of around 80% for example. These rebates are proving to be hugely popular with the public, and contractors are hiring additional staff to meet demand.
As this program was only announced in mid-December and the offices responsible for processing the rebates have only opened in the past few weeks, it is impossible to tell exactly what sort of impact these programs will have on energy efficiency in the province. However, they have the potential to make an impact on the significant share of emissions attributable to buildings (see Figure 3). Participants contribute information necessary to gauge the effectiveness of the rebates in reducing GHG emissions, so an assessment will be possible as the program progresses. Homeowners are aware of the tenuous nature of the rebate program based on the election that is scheduled for June, and are rushing to complete eligible projects.
A strong building efficiency upgrade program with significant emissions reductions would put Ontario ahead of European countries such as Germany and the UK, which have struggled to reduce those emissions. Sadly, the very funding stream the program depends on may be choked off before it is able to have an impact.
On the political front, the opposition party (the Progressive Conservatives) have pledged to eliminate the cap and trade legislation, and presumably the energy efficiency renovation rebate program and others that it funds. The Progressive Conservatives suffered a sexual misconduct scandal involving the party’s former leader within 6 months of the election, and have elected a leader, Doug Ford (brother of former Toronto mayor Rob Ford), who has been compared to Donald Trump.
Much hinges on the outcome of the election. The current government could be defeated, but this is by no means certain, given similar conditions at the outset of the past two elections, with the Progressive Conservatives being defeated on the basis of poor leadership, despite the scandals of the sitting government.
If the Progressive Conservatives are elected, will they succeed in killing the cap and trade program when the Federal Government is insisting that the provinces must institute some sort of price on carbon? Will the $300 million already invested in efficiency renovations be enough to have a significant impact on emissions? The answers to many questions will have to wait until after the election.
Ontario’s cap and trade program seems poised to begin delivering significant and popular improvements to the energy efficiency of the existing building stock. But those programs are vulnerable to political opposition against a government that is widely seen to be well past its prime.
Niall Williams took an MSc in Environmental and Natural Resource Economics from the University of Copenhagen, and is currently an active observer of Ontario’s energy transition.