Late last year, Ontario's Auditor-General put out a report detailing the extent of the provincial government's mismanagement of the electricity system. According to Bonnie Lysyk, thanks to a misguided government policy of artificially pumping up the cost of producing power in the province, Ontarians had overpaid for electricity to the tune of $37-billion between 2006 and 2014, and will continue to be overcharged by another $133-billion by 2032.
The scale of the waste is so large as to be almost incomprehensible, which may explain why Ms. Lysyk's report was a one-day news wonder when it landed last December. Once the count gets into the hundreds of billions, the mind goes numb. If the province announced construction of the Burning Money Biomass Plant, fuelled by bales of five and 10-dollar bills, it probably wouldn't be capable of destroying $170-billion.
The size of the disaster in the province's electricity system is hard to get your head around. But voters, consumers, businesses and especially the Liberal government should be rereading Ms. Lysyk's report. Because a document leaked to The Globe and Mail this week suggests that the Liberals, who a decade ago broke the electricity system through a fatal combination of good intentions and a willful disregard of both expertise and experience, may be preparing to repeat the exercise with their next greenhouse gas reduction plan.
The thing is, Ontario needs a greenhouse gas reduction strategy. So does every province, and so does the federal government. To meet our international commitments, and to bend the curve on global warming, those carbon-reduction goals have to be ambitious. Ontario's proposed Climate Change Mitigation and Low Carbon Economy Act aims to reduce the province's 1990 emissions by 15 per cent by 2020, 37 per cent by 2030 and 80 per cent by 2050. The province is committing itself to substantial carbon reduction in the next decade, and a near-zero carbon economy in a generation.
Those are not impossible ideals. They're doable – using the right tools. Dramatically reducing carbon emissions is not a crazy idea, but the way Ontario is proposing to get to a low-carbon economy almost certainly is.
A decade ago, the government of Ontario started driving up electricity costs with a simple objective in mind: It wanted to reduce greenhouse gas emissions from the production of electricity. This was the right objective. But the way it went about it was all wrong. Instead of encouraging the electricity sector to be as efficient as possible, the government essentially ordered it to become costly, inefficient and irrational. Some of this was motivated by fantasies of industrial policy – look, Ma, we're subsidizing the Green Jobs Of the Future! – and some of it was driven by an insistence on ignoring basic economic advice, much of it coming from the government's own experts.
The result is that the cost of generating electricity in Ontario has exploded, even as power costs plummeted elsewhere. Between 2004 and 2014, power generation costs in Ontario increased by 74 per cent, according to the auditor. This benefits no one. The higher prices don't come from carbon taxes; they come from higher electricity production costs. And that imposes a heavy cost on the economy.
However, because prices were rising, Ontarians started using less energy. Power use dropped by 7 per cent between 2006 and 2014. But at the same time, thanks to subsidies to encourage greater power production from green sources, the province's generation capacity grew by 19 per cent. As a result, the province is now a major exporter of electricity – sold at prices far below the cost of production. The more power the province exports, the more taxpayers and ratepayers lose.
Ontario could have chosen a different route. Instead of politicians completely remaking the electricity sector on a whim, introducing inefficiencies by deciding what power technologies to back and how much to subsidize them, Ontario could have done the opposite. It could have set a carbon-reduction goal, imposed carbon taxes on carbon-generating fuels – and left it to producers and consumers to figure out how to most efficiently respond by reducing their own costs and emissions. It should have taxed dirty power and let the market figure out the cheapest way to get to lower emissions levels.
Nearly a decade later, this week's leaked document on its upcoming greenhouse-gas strategy suggests Kathleen Wynne's government has not learned from her predecessor Dalton McGuinty's mistakes. Glen Murray, a minister with more enthusiasm than knowledge, is in charge of the environmental file; last time around, George Smitherman was the designated enthusiast. Ontarians should be worried.
The goal of any carbon-reduction plan should be to reduce emissions as much as possible at the lowest cost possible. Canada doesn't need an economic revolution; it needs simple but clear incentives, like carbon taxes, for companies and people to reduce carbon use.
But what Mr. Murray is working on sounds like a Leap Manifesto. It's not a plan to dramatically lower emissions while screwing up the economy as little as possible. It reads more like a blueprint to meddle as much as possible, to get government's hands on as many levers and in as many pockets as possible, with climate change as a pretext.
Ontario's alphabet soup of electricity bureaucracies will now get another, the "ultra-low carbon service provider," which promises a "state-of-the-art 21st-century approach" to managing power and more. There will be subsidies galore for consumers, ensuring a "zero-emission or hybrid electric vehicle in every multi-car household driveway within eight years." There will be subsidies for industry, of course, "positioning the province to be a leading ultra-low carbon technology company hub." It's not a plan to harness the free market to achieve carbon reduction. It looks like a plan for a lot of central planning.
A decade ago, this is exactly how the province's $170-billion electricity fiasco started. It's Groundhog Day in Ontario, and the Wynne government still hasn't seen its shadow.