Published On: Monday, 21 August 2017

Sobering Lessons from Ontario’s Green Energy Policies

Sobering Lessons from Ontario’s Green Energy Policies

- The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies through research that is nonpartisan, evidence-based and subject to definitive expert review.

CANADA - After eight years, Ontario’s green energy policies have yielded moderate environmental gains while drastically increasing energy prices, says a new report from the C.D. Howe Institute.

In “Ontario’s Green Energy Experience: Sobering Lessons for Sustainable Climate Change Policies” author Michael Trebilcock, prominent law and economics expert, measures the success of the Green Energy and Green Economy Act based on its environmental outcomes, its effects on energy prices, and its impact on employment in the province.

“These policies have had a dramatic impact on electricity costs in the province, but they have generated very limited environmental benefits and have had a negligible to negative effect on economic growth and employment,” states Professor Trebilcock.

Rising costs are one problem. For example, the on-peak price rose from 9.3 cents per kilowatt hour in November 2009, to 18 cents per kilowatt hour in November 2016. This represents a compound annual increase of 9.9 percent.

The policies are also inherently limited because the electricity sector’s share of greenhouse gas emissions in Ontario in 2012 was only about nine percent of total emissions. The focus on electricity is out of proportion with the areas of the economy that are most in need of closer scrutiny. Transportation, for example, contributed 34 percent of greenhouse gas emissions in Ontario in 2012.

Finally, Professor Trebilcock notes that while the Ontario government claims that its green energy policies have created over 30,000 jobs, this number does not distinguish between temporary and permanent jobs or between low-paid service jobs and higher-paid skilled jobs, and more importantly, does not take account of jobs lost through higher electricity prices.

As an alternative, the report suggests that Canada impose a revenue-neutral national carbon tax that promotes economy-wide cost-effective emission reductions, with revenues rebated to the provinces from which they originate. This should be supplemented by limited, well-targeted subsidies for research and development.

Professor Trebilcock concludes with a warning. “It is crucial that Canada’s private sector not bear a large overall fiscal burden. Moreover, in addition to domestic policies, the ability of Canadian firms to compete in global markets will also play an important role in developing a Canadian clean technology sector.”