Ontario environmental policy—excessive costs, little environmental benefits

In a recent news release, the government of Ontario recognized “outstanding achievements in environmental protection” by announcing the recipients of the 2016 Minister’s Award for Environmental Excellence. Since 2011, the award has been given to 38 organizations and individuals for efforts that, in theory, support the government’s own action on “protecting our environment and fighting climate change” while also “creating new jobs” and “grow[ing] our economy.”

Finding economically-efficient ways to help the environment is a laudable goal. But with soaring electricity costs and an increasing regulatory burden, we should ask whether Ontario government actions been successful. Have its environmental policies yielded significant environmental benefits while encouraging economic growth?

A recent Fraser Institute study examined Ontario’s flagship initiative—phasing out of coal-fired plants—to ascertain its impact on air pollution levels.

In 2005, the province of Ontario began a process that eventually resulted in phasing out two of its largest coal plants, with claims that this policy would result in significant improvement in air quality, thereby saving billions in health-care costs. To verify the government’s claims, we developed statistical models of air pollution concentrations in Toronto, Hamilton and Ottawa and assessed whether the removal of coal from the grid could explain changes in air pollution levels in any of those cities from 2002 to 2014.

The study found the coal phase-out had no impact on the level of nitrogen dioxide—a significant component of smog—and had only a small impact on fine particulate matter. We found the elimination of coal was associated with a statistically significant reduction in Ontario ozone levels; however, this impact was offset by increased emissions from natural gas power plants, which were used as a replacement for coal, yielding slightly higher net ozone levels per unit of energy (per terawatt-hour).

Our results show that, overall, the coal phase-out yielded small improvements in air quality, which could have been achieved at a much lower cost by modernizing Ontario’s coal-fired plants rather than closing them.

The coal-phase out is not the only Ontario policy with excessive costs and disappointing environmental benefits.

In an attempt to protect the environment and fight climate change, the province of Ontario launched its cap-and-trade program in January 2017 and mandated emission reductions to reach 15 per cent below 1990 levels by 2020. However, as the Fraser Institute has noted, there are many pitfalls associated with this program that raise serious questions about its costs versus benefits.

The program is expected to impose large direct and indirect costs on households and businesses, which have been estimated to be roughly $8 billion from 2017 to 2020. Despite imposing huge costs, however, the program is expected to only slightly reduce emissions in Ontario. As Ontario will soon join the California and Quebec cap-and-trade programs, many Ontarian polluters would be able to buy more emission allowances than are issued by the Ontario government, often at lower rates, offsetting emission reduction efforts in the province.

If Ontario is serious about balancing the costs and benefits of environmental initiatives, it’s time to step back and examine the real-world performance of its policies and take serious corrective action to reverse costly decisions of the past that have failed to bear fruit. Flashy awards and self-congratulatory rhetoric are no substitute for careful quantitative analysis.