There is both threat and opportunity for Ontario's business community in the Liberal government's cap-and-trade climate plan.
Assessing those feared risks and potential rewards will be difficult until Premier Kathleen Wynne finalizes key details, a process that could take more than six months to complete and one that will create work for an army of business lobbyists eager to protect their companies' interests.
(Explainer: What a cap-and-trade system would do)
The province's battered manufacturing sector wants to ensure the carbon-pricing plan doesn't result in new competitive pressures, though industry spokespeople on Monday welcomed the increased effort to reduce greenhouse gas (GHG) emissions. For clean-tech producers – those companies that specialize in energy-efficiency technologies or low-carbon fuel alternatives – the cap-and-trade plan will provide market incentives to develop new customers and expand their businesses.
Business leaders are waiting to see the emissions cap the province sets and how quickly it is lowered, as well as how the government intends to protect energy-intensive industries that are particularly vulnerable to competition from outside the province.
Ontario's future partners, Quebec and California, have both issued free emission allowances to industries such as cement, refining and, in Quebec's case, aluminum, in order to prevent the loss of investment and jobs in those sectors to states or provinces that don't have carbon pricing. Such a shift would not only be economically painful, but it would represent zero benefit for the climate if the manufacturing and the resulting emissions simply moved elsewhere.
"All jurisdictions that have a carbon-pricing system in place recognize that there has to be in the early years accommodation for energy-intensive, trade-exposed industry," said Michael McSweeney, president of the Cement Association of Canada. "Otherwise, what you have happen is massive imports [of those products] into the country."
Subject to that protection, the cement industry supports Ontario's cap-and-trade plan because it provides a more certain environmental outcome than does a carbon tax of the kind British Columbia has implemented, Mr. McSweeney said.
Over time, Quebec and California both plan to reduce the number of allowances they provide to industry, in order to force companies to become more energy efficient, thereby reducing their GHGs.
Petroleum refiners and marketers are looking to avoid onerous carbon levies that will drive up their costs while encouraging customers to use less or – in the case of long-haul truckers – fill up outside the province. Quebec's gasoline wholesalers complain about the administrative burden of that province's system, and loss of business to competitors in neighbouring provinces and states – pitfalls the industry hopes Ontario can avoid.
One of the most challenging issues for the Ontario government will be the plan's impact on electricity prices. The Liberal government has long been criticized for driving up power costs as it moved to eliminate coal-fired plants and stimulate a renewable industry by offering high-priced contracts for wind and solar. Now, the vast majority of the province's generation system is emissions-free, but Ontario does rely heavily on natural gas-fired power, particularly at high-demand times – such as hot summer days – when usage as well as prices soar.
Bill Hammond, chief executive at Guelph, Ont.-based transformer maker Hammond Power Solutions Inc., said he supports efforts to reduce emissions but worries about further escalations in electricity costs. Ontario is already "an expensive place to do business in terms of electricity costs and labour rates when compared to the United States," he said.
But the cap-and-trade plan should create demand for efficiency technologies, said John Cook, president of Toronto-based clean-tech investor Greenchip Financial Corp.
That will generate more business for companies that make motors, electronics or information technologies that help their clients "do more with less," he said. There will also be increased demand for more efficient building materials – such as windows, wall panels and energy-efficient lighting products – and for advanced meters to enable residential and commercial property owners to reduce electricity and natural-gas consumption.