Canada: Summary Of Environmental Commissioner Of Ontario's 2016 Annual Greenhouse Gas Progress Report

On November 22, 2016, the Environmental Commissioner of Ontario ("ECO") released the 2016 Greenhouse Gas ("GHG") Progress Report, Facing Climate Change, which focuses on climate change mitigation (i.e. reducing GHG emissions). First, the report reviews the science of climate change and its global impact. It reports on Ontario's current emissions and emphasizes the urgent need for Ontario to dramatically reduce its GHG emissions. Second, it reviews the following key measures taken by the government to reduce GHG emissions: the Cap and Trade Program; the Greenhouse Gas Reduction Account; and the Climate Change Action Plan.

Ontario's Carbon Footprint

The ECO reports that Ontarians have one of the highest emissions per capita worldwide and, further, that Ontario is warming faster than the global average, especially in the north. From this perspective, Ontario has adopted ambitious targets to reduce its GHG emissions by: 15% below 1990 levels by 2020; 37% below 1990 levels by 2030; and 80% below 1990 levels by 2050. Ontario has met its 2014 target (6% below 1990 levels), achieved mostly by closing coal-fired power generating stations. Meeting future targets will require substantial effort and innovation.

By 2020, Ontario seeks to reduce emissions a further 15 megatonnes (Mt) (by comparison, there was a 12Mt reduction from 1990 to 2014). Some of Ontario's challenges include its dependence on fossil fuels for 80% of its energy, and its transportation sector accounts for the fastest growing share of GHG emissions. The ECO recommends that the government regularly report on Ontario's entire climate change footprint, as opposed to reporting direct GHG emissions alone, and that a higher priority be given to reducing Ontario's methane and black carbon emissions.

Cap and Trade Program

Ontario's new Cap and Trade Program is slated to cover 82% of its direct emissions. The first compliance period begins January 1, 2017 and is to be linked with Québec and California in 2018. The ECO supports the program, describing it as reasonable, well-designed and one that balances the urgent need for GHG reductions with the cost to Ontario citizens and businesses.

In 2020, Ontario's capped emitters are estimated to have a 24Mt gap between their projected business-as-usual emissions and the emissions allowances that will be distributed by the government (both free and by auction). To fill this gap, emitters have several options that include reducing their emissions further or buying allowances from other jurisdictions. While linking Ontario's Cap and Trade Program with Québec and California will reduce costs for Ontario GHG emitters, buying allowances from outside the province could impact the actual reduction of Ontario's emissions. Moreover, California's cap and trade system currently faces legal problems. A timely supply of high-quality Ontario offset credits (i.e., voluntary GHG reductions outside the capped sectors, which can be purchased by emitters) will prove effective in keeping investment and GHG reductions in Ontario.

The ECO recommends that the government do the following: be more transparent about the allocation of free allowances; set legally binding carbon budgets; and prioritize the approval of offset protocols to enable timely and ample supply of high-quality Ontario offsets. The ECO also recommends the government plan for the contingency that California's cap and trade system may be altered and/or not be reauthorized after 2020.

Greenhouse Gas Reduction Account

Ontario has chosen a 'cap and invest' approach to carbon pricing, wherein the government will channel the revenue from the Cap and Trade Program into a Greenhouse Gas Reduction Account (GGRA) to fund new GHG reductions programs. The ECO questions whether the GGRA fund (up to $2 billion per year) will be genuinely used to reduce GHG emissions or funneled into other government priorities.

The ECO recommends that the government set out evaluation criteria for proposed GGRA expenditures, and an explicit policy on allocation of funds between competing objectives. Further, it urges the government to maintain detailed records of the justification for each GGRA expenditure.

Climate Change Action Plan

The Ontario Government predicts that the Cap and Trade Program will contribute only 2.8Mt of the 18.5Mt in GHG reductions needed to achieve its 2020 target of a 15% reduction below 1990 levels.  An additional reduction of 9.8Mt is expected to come from the Climate Change Action Plan, which will be funded by the GGRA. While applauding the Action Plan's scope, ambition and valuable initiatives, the ECO is skeptical of its ability to produce 9.8Mt in new reductions by 2020.

The ECO found that the key proposal to subsidize electricity prices, which is projected to result in 3Mt of GHG reductions by 2020, will not meet any of the key policy objectives for effective emissions reductions and should not be considered an acceptable use of GGRA funds. Similarly, the ECO found no evidence to support the claim that low-carbon technology adoption by industry can contribute 2.5Mt in additional reductions, even suggesting that delays in the Ministry's processing of applications for approval to switch to alternative fuels are likely to reduce the contribution that Ontario industries can make by 2020.

Based on this analysis, the ECO concludes that the almost 6Mt gap between the 2020 target and the estimated reductions from Cap and Trade and the Action Plan, currently expected to be filled by offset credits and the purchase of California allowances, may be greater than the government's forecast.

The ECO's Closing Thoughts

The ECO titled the last chapter of her report, "Knowledge + Action = Hope".  The ECO praises Ontario for its efforts to date, stating, "Ontario has punched above its weight, and deserves kudos for its active role in national and international co-operation". However, the ECO also notes a chasm between what the government knows and what the public understands, and urges the Ontario government to consistently show the public that it takes climate change seriously. The ECO concludes her report by asking Ontarians to step up and not leave the combat against climate change entirely to governments – "No one can do everything, but everyone can do something."

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