The Ontario government's plan to introduce green bonds is sound in theory, but in practice will likely end up as business – and debt – as usual.
Government needs to be involved in environmental improvement efforts. Short-term financial pressures – the need for quarter-over-quarter profit growth – prevent the private sector from engaging in the type of multi-decade strategies necessary to protect the environment.
That said, it's hard to see how labelling a $34-billion debt issue "green" will make it any different than a run-of-the-mill Government of Ontario bond. ($34-billion, by the way, is the difference between what the government has already funded and the $50-billion it plans to spend on its transit plan).
Finance Minister Charles Sousa said that the bonds are intended to fund "anything that reduces the carbon footprint." The subway extensions makes clear sense here, and plans to raise revenue by charging tolls to single occupant drivers using car pool lanes could provide a marginal increase in government revenue as well.
The Toronto subway, however, operates at a loss. Unless that changes, matching new green bonds to non-existent operating profits will offer no added assurances to investors – just like a regular bond, interest payments will come from the general provincial coffers.
It's still unclear how liberally the phrase "reduces the carbon footprint" will be interpreted. Cars get better gas mileage on highways versus city driving – does this definition apply to the planned seven-kilometre expansion of the 427? Unless tolls are added, that will bring in no direct revenue at all.
My apathetic view of green bonds changes, of course, if something really novel like a privately owned and operated subway line gets proposed, but does anyone see that as remotely feasible? The contentious relationship between the City of Toronto and the transit union during mayor David Miller's tenure suggests that TTC employees would rather burn the city down than allow any public transport outside of their control.
It would be tremendous if the funds from green bonds were used creatively, in feasible public/private schemes for instance, but I'm not holding my breath. Until proven otherwise, green bonds are merely a clever marketing tool allowing Ontario – a province where debt-to-GDP has tripled in the past 20 years – to issue more of the same old provincial debt.
Scott Barlow