Ontario’s green energy botch-up a lesson for those fighting climate change

Voters will rebel against carbon pricing if governments are as incompetent as the Ontario Liberals have been.

Thestar.com
Dec. 6, 2015
By Thomas Walkom

Reducing greenhouse gas emissions is tricky. It’s easy to set targets and hard to do anything that might meet those targets.

But harder still is the ability to accomplish any of this in a sensible way. That’s the lesson from Ontario auditor general Bonnie Lysyk, who last week issued a scathing report on the provincial Liberal government’s deeply flawed attempt to promote green energy.

Prime Minister Justin Trudeau and others involved in the international efforts underway in Paris this week to curb climate change might want to pay attention to her findings.

Ontario’s dreadful experiment began for the best of reasons - a desire by the government of then premier Dalton McGuinty to shut down the province’s coal-fired electricity-generating plants.

These plants produced smog that could prove lethal. More important, by spewing tons of carbon into the air they contributed to the global climate-change crisis.

McGuinty was hailed for his actions and rightly so. He propelled Ontario to the front line of jurisdictions willing to take action in the battle against global warming.

But the coal plants had to be replaced by something. Ontarians still needed electricity. The government’s answer - again laudable - was to go green. In 2009, it took the bold step of developing a coherent green-energy plan for Ontario.

Politicians often say that environmentalism has economic benefits. The McGuinty Liberals devised a scheme that they thought would show the truth of this statement.

First, they would promote the growth of green energy sources such as windmills and solar panels by offering premium prices for any power these utilities produced.

Second, they would insist that, in order to qualify for bonuses, green generators would have to use equipment made in Ontario.

Coming at a time when Ontario manufacturing had just been gobsmacked by recession, it seemed - in theory - a coherent industrial and ecological strategy.

In theory.

In practice, as Lysyk’s report spells out, it became a horror show - marked by hubris, arbitrary decisions, political calculus, a bizarre reluctance to follow the dictates of law and sometimes just plain bad luck.

The bad luck arrived in 2013 when the World Trade Organization ruled that Ontario’s attempt to favour domestic suppliers was an improper subsidy. That ruling wiped out the entire industrial portion of the Liberals’ green strategy.

What was left was the ecological portion. But that too was marked by troubles, many of them self-inflicted.

Sometimes, the Liberal mistakes defied belief. In Thunder Bay, for instance, the government replaced a coal-fired generating plant with one powered by biomass — essentially wood chips.

Yet the new plant couldn’t use ordinary wood chips readily available in Northwestern Ontario. It needed special wood chips from Norway.

As a result, the cost of producing power at this Thunder Bay plant was an astounding $1,600 per megawatt-hour - compared to $64 per megawatt-hour at other Ontario biomass plants.

The prices paid to those generating wind and solar power were also unduly high, Lysyk says — in part because, for the first few years, the government didn’t bother with competitive tenders.

Even after tendering was introduced, the government still paid between two and four times the market price for wind and solar power.

Thanks to these handsome incentives, would-be generators flooded in. As a result, Ontario produced so much power it had to export some - usually at a loss.

In some cases, Ontario had to pay other jurisdictions to take its electricity.

Lysyk calculates that all of this cost Ontario electricity users $37 billion between 2006 and 2014.

It’s expected to cost an additional $133 billion over the next 17 years.

Everyone knows that tackling climate change will cost something. That is what “carbon prices” (also known as taxes) imply.

Polls suggest Canadians are willing to pay a price now to save the future. But these same Canadians will rebel if they believe the governments inducing them to pay carbon taxes are incompetent, venal or both.

Incidentally, Lysyk looked at the climate-change aspect of the Liberal green-energy plan.

She points out that since electricity generation now accounts for only 9 per cent of the greenhouse gases Ontario emits, it might be more effective - and cheaper - to target something else.