April 26, 2017
On February 17, 2017, the Ontario Ministry of the Environment and Climate Change (“MOECC”) took another step toward implementing the goals in the Ontario Climate Change Action Plan (“CCAP”). By filing the Ontario Climate Change Solutions Deployment Corporation regulation (the “regulation”), the MOECC created a new non-share capital corporation to stimulate the development of clean technology and assist with reducing barriers that may inhibit the implementation of the CCAP and its goals.
What you need to know
The corporation, called the Ontario Climate Change Solutions Deployment Corporation (“OCCSDC”), was designed to further the provincial deployment of clean technology for reducing greenhouse gas emissions. It is tasked with meeting this broad purpose by:
- providing information;
- engaging in marketing;
- providing services and arranging for others to be provided with services;
- providing incentives and engaging in financing activities;
- stimulating private sector financing; and
- researching market barriers inhibiting the deployment of clean technology.
Interestingly, research and development are expressly excluded from the scope of the duties of the OCCSDC.
The regulation places a focus on developing programs that will maximize absolute greenhouse gas reductions and stimulate the use of clean technology by low-income households. Additional programs will be directed at:
- switching from using fossil fuels to other sources of energy;
- energy storage (of various forms);
- renewable energy;
- retrofitting existing structures to reduce or eliminate greenhouse gas emissions;
- stimulating economies of scale in technology;
- stimulating private sector financing; and
- stimulating the construction of buildings that significantly exceed provincial energy efficiency requirements (think net-zero and net-positive construction).
The corporation will be funded in part by the proceeds of Ontario’s cap and trade program, which the Ontario Government estimates to be approximately $2 billion per year.
Why is this important?
Since the closure of Ontario’s coal power plants in 2014 (an event which went generally unnoticed by both the press and the general public), the province’s mighty electric power system has become one of the least carbon reliant in the world. To reduce its GHG footprint further, Ontario must now look to sectors outside of the electricity sector. Under Ontario’s CCAP, we see new clean-tech business opportunities arising in transportation, built infrastructure (buildings and homes), land use planning, commercial industry, First Nations Communities, agriculture and the MUSH sector. The OCCSDC is intended to work in tandem with the CCAP to drive change and stimulate economic opportunities.
Ontario has the tremendous luxury of not being the first jurisdiction in the world to set up a green bank. The UK, Japan, Australia and Malaysia have all cut a path through the forest. Over the past nine years in the U.S., several green banks have been set up at the state level. Of these, New York, California, Hawaii and Connecticut provide excellent examples. Additionally, the concept of the green bank is essentially similar to that of an export development bank – something Ontario businesses are accustomed to working with at the federal level. The key element of a green bank is that it uses public funds, tailored credit requirements and moderately innovative financing techniques to lever private sector finance and commercial innovation capacity in order to achieve specific policy goals. With Ontario’s OCCSDC the focus will be – as it should be – on commercially viable technologies rather than research or early-stage innovation.
The best green banks bring global knowledge and understanding to local markets, use their strategic position to develop market capacity where the private sector would otherwise be unable to, use credit-enhancement, co-investment, securitization and other financing tools to diffuse risk, create scale and mitigate private sector project risk. Ontario’s OCCSDC appears poised to do most of this and, in addition, it also promises to provide direct small-scale incentives and financing to consumers and to businesses to drive practical and attitudinal change.
Where are the opportunities?
The key is to remember that the OCCSDC is intended to work in tandem with the CCAP to drive change and stimulate economic opportunities. These mechanisms provide a “stick and carrot” approach. The other thing to remember is, as several have already said, this is a big deal. We see it impacting most of the economy, including the following key sectors and industries:
- Building and construction industries
- Food manufacturing and processing
- Property development and management industries
- District heating and cooling companies
- Urban planners
- High-emitting sectors, including cement, lime, forestry and steel industries
- First Nations communities and governments
- Regional governments
- Automobile manufacturers
- Local distribution companies
- Renewable fuels producers
- Urban transportation systems
- Real estate businesses
- Universities and colleges
- School boards
- Natural gas sector participants
In Transportation, for instance, we see the combination of the CCAP and the OCCSDC:
- creating support to enhance the availability and use of lower-carbon fuel by funding fuel distributors for high-blend sustainable biofuels and infrastructure upgrades;
- supporting the re-use of agricultural and food waste as a source of methane fuel;
- generally increasing the distribution and use of electric vehicles and increasing charging-station infrastructure in the province;
- supporting expanded cycling infrastructure in urban areas and along roadways;
- incentivizing low-carbon commercial vehicle solutions; and
- accelerating the construction of regional light rail systems.
In Built Infrastructure, we expect to see:
- a complete retrofit Ontario’s aging social housing infrastructure;
- encouragement for homeowners to purchase or build Net Zero Carbon Emission homes through providing incentives and rebates;
- encouragement of the installation of low-carbon technology in existing homes;
- funds to upgrade and retrofit colleges, universities, hospitals and schools (a vast undertaking when considering the scale and age of this infrastructure);
- “energy audits” before new and existing single-family homes may be listed for sale; and
- low-carbon content requirements for natural gas, and encouraging more efficient use of natural gas in industrial, transportation and building sectors.
In the Industrial Sector, we expect to see:
- aassistance for industries and businesses to transition to and adopt low-carbon technologies and manufacturing solutions, to reduce net methane output from industrial processes and to select low GHG production inputs;
- focus on high-emitting sectors, such as the cement, steel, and lime production industries;
- focus on the province’s gigantic food and beverage-processing sector to assist in expanding use of emissions-reducing processing technologies;
- transitional assistance to retrofit agricultural facilities, including new greenhouses and grain dryers and improved storage, cold storage and transportation facilities.
For First Nations Communities, expect
- collaboration with communities to facilitate transitioning to low-carbon, non-fossil fuel energy;
- renewed efforts to connect remote communities to provincial electricity grid;
- support to reduce reliance on diesel fuel and enable community microgrid use of renewable energy sources;
- low-carbon job training opportunities and training partnerships; and
- enhanced strategic investment opportunities for Band Councils in projects outside of the community.
For Municipalities, expect:
- support for community energy mapping - integrating gas, electricity, heating and cooling, water, transportation, waste consumption and building data into a single platform;
- support to implement Transportation Demand Management Plans;
- requirements for electric vehicle charging stations in surface lots;
- requirements for “Green Development Standards” –reducing motorized vehicle use and supporting sustainable community development; and
- support for climate change mitigation strategies in municipal official plans.
What comes next?
The Board of the OCCSDC is currently being assembled. After this happens, it will take time for programs to be developed and launched. As well, key details on the operation of the new corporation – including reporting obligations, how it will interact with existing and emerging federal and provincial bodies such as the Ontario Energy Board and the emerging federal infrastructure bank – will need to be finalized and revealed. That being said, there is significant pressure on the province to get things underway.
Given the grave, global impact of carbon and other GHG emissions and the very diffuse nature of the GHG problem for Ontario, the OCCSDC and its parent policy, the CCAP, promise to drive gradual and fundamental change and to create substantial economic opportunities across many sectors. As with green banks elsewhere, early renditions are likely to have flaws and there will undoubtedly be missteps. That being said, considering the sums involved and given the experience seen in other jurisdictions, the launch of the OCCSDC will create economic growth and innovation opportunity and, ultimately, should help Ontario meet its GHG objective. This one’s, as the saying goes, got legs.
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