Uncertainty for region after cancellation of cap and trade
The cancellation of Ontario’s cap and trade program has left a tone of uncertainty for municipalities such as Durham Region. Although about $900,000 in savings has been identified, regional staff say a carbon policy imposed by the federal government could negate those savings.
By Dave Flaherty/The Oshawa Express
Ontario’s political pendulum swing to the right has meant changes for not only residents but regional and local municipalities as well.
At the top of that list is the cancellation of the province’s cap and trade program.
Under that program, the Durham York Energy Centre (DYEC) was considered a mandatory emitter and was required to remit a total number of emission allowances or related-equivalent compliance instruments, such as carbon offsets, equal to the emissions created during the compliance period.
In the past, the region has applied for and received free allowances to meet provincial compliance obligations.
According to a regional staff report released on July 20, the status of the DYEC’s compliance obligations is uncertain.
Under the cap and trade program, the region incurred additional costs for carbon-intensive energy use, including gasoline, diesel, fuel oils and natural gas.
In particular, vehicles and facility-related fuel consumption represent a significant portion of these increased costs.
Durham Region had budgeted $600,000 for 2018 to cover carbon cost impacts and just under $300,000 in anticipation of increased natural gas costs in relation to the cap and trade program.
“It is estimated that cap and trade directly increased energy costs in excess of $900,000, which is included within the approved regional budgets,” says Mary Simpson, director of financial planning and purchasing.
With the cap and trade program out the door, numerous initiatives funded by its revenue have gone by the wayside as well.
The Ontario Municipal Commuter Cycling program provided up to 80 per cent of eligible capital costs for municipal cycling projects.
Durham was approved for a $2.2 million allocation under the first round of the program.
The region was also given $3.8 million through the Social Housing Apartment Improvement Program, which supported retrofit projects for social housing apartment buildings of 150 units or more.
An additional $600,000 was doled out through the GreenOn Social Housing Program, which funded retrofits in social housing apartment buildings with fewer than 100 total units.
An application for electric vehicle charging infrastructure for regional headquarters is on a wait list, subject to availability of funding.
With the provincial cap and trade program gone, the federal Liberals under Prime Minister Justin Trudeau has indicated it will impose a carbon levy on Ontario.
Regional staff anticipate the federal plan will consist of both a carbon levy applicable to fossil fuel and an output-based pricing system for industrial facilities that have emissions above legislated thresholds.
Prices for carbon will start at $10 per tonne this year and increase by $10 per tonne each year through 2022, maxing out at $50 per tonne.
Provinces must inform the federal government on plans to comply with standards by Sept. 1, 2018, with the federal plan expected to be in place by Jan. 1, 2019.
Premier Doug Ford has stated that he intends to challenge the federal government on the issue in court.
With the federal carbon levy looming, regional staff warns in the report that the expected decrease in fuel and natural gas costs due to the cancellation of the cap and trade program could not come to fruition in the long run.
It is anticipated that the output-based pricing system would apply to industrial facilities that emit at least 50,000 tonnes of carbon dioxide annually, but may not apply to municipality-owned buildings.
“While DYEC is a municipally-owned facility, further clarity is needed on its status under the backdrop given that heat and steam producing facilities may fall under the framework,” the report reads.
Uncertainty also surrounds Ontario’s future climate change action plans, environmental legislation and funding already allocated to the province by the federal government under the Pan-Canadian Framework on Clean Growth and Climate Change.
Moving forward, Simpson says regional staff will continue to monitor, assess and report to regional council as detailed regulations and other information becomes available over the next few months.
Earlier this month, the Association of Municipalities Ontario (AMO) submitted a letter to the new government, highlighting the implications of eliminating the cap and trade program as a priority interest.
“The August AMO conference in Otttawa will provide further opportunities for provincial leaders and municipal representatives to discuss issues affecting municipalities,” Simpson adds.