Ontario Climate Action Plan—subsidizing electric cars is a costly approach to emissions reduction

Ontario’s provincial government recently released its Climate Change Action Plan, which contains almost 80 distinct proposals, command-and-control regulations, and subsidies all in the name of fighting climate change.

The plan is wide-ranging, covering areas such as transportation, agriculture, commercial and residential buildings, etc. and represents yet another attempt by the Ontario government to micromanage the economy and the daily lives of Ontarians.

Of course, reducing greenhouse gas emissions is a reasonable policy objective. However, that doesn’t mean every policy designed to achieve this objective is smart. Any new initiative should always seek to achieve emissions reductions at the lowest possible cost per-tonne.

Unfortunately, the climate change plan includes a number of policy proposals that will come at a high cost and yield only minimal emissions reductions.

Over the coming weeks, we will be releasing a number of blogs on the Climate Change Action Plan to help Ontarians understand some of what’s in the plan and what the costs and results of various initiatives could be.

The first area of the plan that we will look at is electric cars. The government’s push for electric cars is an example of how the government appears to be embracing policy strategies that reduce emissions only minimally and at an unnecessarily high cost.

Specifically, the Action Plan outlines how the province will provide subsidies for electric vehicles as well as charging stations, while also eliminating the HST on zero emissions vehicles, and providing free overnight electric vehicle charging.

The government costs the first two subsidies out at $140-$160 million, they don’t provide estimates on the lost revenue (i.e. cost) from the HST elimination, and they estimate that the free overnight electricity for charging will be $15 million. If you include the cost of other measures which the government intends to use to increase the electric vehicle purchases then the estimated cost of just these measures totals between $247 and $277 million over the next five years.

And what will Ontarians receive in terms of greenhouse gas (GHG) reductions for the money being used to prop up electric cars?

The reduction will amount to 50,000 tonnes or 0.05 megatonnes by 2020 according to the government’s own estimates. To put this into perspective, Environment Canada reports that GHG emissions in Ontario in 2014 totalled 170 megatonnes. That means that on the low end, Ontario will pay $247 million for a 0.03 per cent reduction from their 2014 emissions level.

This is just one example of an element of the government’s action plan that appears to represent an inefficient approach to emissions reduction. The government also plans to spend between $150 and $250 million on other transportation initiatives to “support cycling and walking,” which will result in only minimal emissions reductions.

In short, the government’s drive to push Ontarians towards electric vehicles appears to be an extraordinarily inefficient and expensive strategy to try to achieve its goal of reducing emissions.