Commentary

September 2016

Peter Boag
President & CEO, Canadian Fuels Association

 

A Cautionary Tale:  the unintended consequences of a ‘green’ sprint 


More than a decade ago, Ontario took a headlong ‘green’ dash into wind and solar energy. So begins a cautionary tale in which the rush to be green helped set Ontario electricity prices on a steep upward trajectory that shows little sign of abating. Last year the province’s Auditor General found that consumers paid $37 billion more than necessary on their electricity bills from 2006 to 2014. Some Ontarians are now facing a choice between having the lights on or food on the table. 

Earlier this month the Ontario government announced plans to exempt electricity bills from the provincial portion of the HST — an 8 percent taxpayer funded subsidy for all ratepayers. Eligible rural consumers will receive a further 20 percent reduction. This is the second time the government has intervened to have taxpayers pick up a portion of the electricity tab for ratepayers. Between 2011 and 2015 the government’s Clean Energy Benefit dipped into the pockets of Ontarians to provide a 10 percent rebate. And now Ontario has announced that it is cancelling a $3.8 B second round of wind and solar electricity procurement.
 

Avoiding unintended consequences 

Good energy policy requires detailed analysis, compromise and an understanding that big changes take time and should be implemented carefully. These are the lessons that must prevail in a pan-Canadian framework to combat climate change, especially as it pertains to reducing the carbon footprint of transportation.

Transportation accounts for about 25 percent of Canada’s greenhouse gas (GHG) emissions. Road transportation makes up two thirds of this amount — a contribution in proportion to the critical role transportation plays in our economy. The movement of people and goods is directly linked to GDP, our prosperity and Canadians’ quality of life.  

Transportation climate policy that is poorly conceived and executed could deliver unintended consequences. We must avoid constraining Canadians’ personal mobility and limiting businesses’ ability to ship goods to markets throughout Canada and participate in global supply chains.   

Smart policy that achieves meaningful emissions reductions must be based on credible economic analysis, a thorough understanding of what technology and innovation can realistically contribute, and solid insight into consumer expectations and behaviour.    
 

Key questions must be answered

Canada is already well on the road to a lower carbon transportation future. Technological innovation is delivering rapid improvements in the efficiency of ICE cars and trucks, and will continue to do so for the foreseeable future. Optimizing the efficiency of conventional internal combustion engine (ICE) vehicles remains the lowest cost pathway by far to reduce GHG emissions. Emerging vehicle and fuel technologies will play a role, but consideration must be given to the pace of development and consumer acceptance. Can new technologies deliver on aspirational promises and timelines? How will consumers and businesses respond? Are GHG abatement costs of $100, $500 or even $1,000 per tonne rational and justifiable? What will be the fully realized impacts on our economy?

Ontario’s cautionary tale underscores the need to formulate climate policy based on thorough answers to these questions, to avoid the need for U-turns. Let’s forgo a ‘green’ sprint toward a glossy utopia in favour of a well-considered and committed marathon to an economically and socially sustainable lower carbon future.