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CEEA’s Efficiency Matters Blog

How to fight climate change and create economic growth

Carbon pricing models, tax incentives and how to motivate businesses and consumers in Ontario

CEEA’s big idea for Ontario’s climate policy: Create a home renovation tax incentive to combat the underground economy, generate revenue, create jobs and cut emissions.

When it came to deciding what to focus on in our recent submission to Ontario’s Ministry of Environment and Climate Change we had to address one of the most talked about issues among our industry — which carbon pricing model to use. During brainstorming sessions it became clear that identifying the best model would be beyond our expertise and would be best left to the government. We do however have lots of expertise in examining what programs and initiatives work in terms of energy efficiency and one thing we were sure about is that whatever model is adopted it must ensure the capital remains in Ontario and does not flow to other jurisdictions. Moreover, this funding should be used as a catalyst for projects that support a low carbon economy.

What can we learn from California and Quebec?

We think Ontario would do well to benefit from the experience of others. With the proper accountability, independent evaluation and reporting requirements, cap-and-trade can be a powerful, revenue-neutral opportunity to increase greenhouse gas (GHG) savings.

If we were to lean towards any particular model we would look to California, the first US state with a comprehensive cap-and-trade system that dates from 2006. To reach its goal of reducing GHG emissions state-wide to 1990 levels by 2020, the state established a cap-and-trade program featuring quarterly auctions selling emission allowances. These auctions have already generated significant amounts and are expected to generate billions in state revenue over the coming years. The process is also transparent with regular reports sent to citizens on how funds are distributed and how they are related to meeting emission goals.

In Canada Quebec also has an effective cap and trade program in place.

One of the most important considerations will be ensuring that the programs developed will motivate businesses to innovate, and inspire consumers to conserve and reduce their carbon footprint. To achieve that customized energy use information is essential. Supplying social benchmarking programs, such as those used by Opower, across the province and using tools that go beyond improving data availability and progress reporting will help achieve success.

It is work that can inform building codes, new training and empower communities as pointed out by Quest Canada.

Let’s borrow a successful tax credit strategy

Collaboration should also be considered a valuable tool when it comes to developing effective strategies. CEEA believes various government departments should cooperate more effectively for one idea in particular: Ontario could draw on the wildly successful Ontario Film and Television Tax Credit and establish a Home Renovation Tax Credit.

Of course those of you who know me understand the film tax credit is near and dear to my heart. I sat at the helm of the Canadian Film and Television Production Association (now CMPA) during the heady days of Canadian contents’ growth as a result of strong provincial and federal tax credit programs. Not only was Canadian programming enriched – it grew a strong and skilled, employable production sector right here at home. We need to transfer that thinking to the renovation industry and eradicate the underground economy of trades and contractors while creating a strong tax-paying energy efficient sector.

CEEA’s plan would see the Ministry of the Environment and Climate Change working with the Ministry of Finance and the Ministry of Municipal Affairs and Housing, as well as stakeholder groups like the Ontario Home Builders (OHBA), and HRAI (Heating Refrigeration and Air Conditioning Institute of Canada) to examine the potential for a Home Renovation Tax Credit. Given that the home renovation sector is also, like the film and television sector, extremely labour intensive, this would appeal to home owners while generating tax dollars for the provincial government from what has become a large underground economy. The OHBA reports that the construction industry’s underground economy is responsible for annual government revenue losses of up to $298 million in GST and up to $1.6 billion in income tax, as well as losses in CPP, WSIB, EHT and employment insurance premiums.

Tax credits are incentive instruments that can survive. They would encourage Ontarians to deal with reputable contractors and Ontario would be assured that this economic activity was happening within the tax system.

Yes, there are lots of questions and angles to be assessed, but the benefit of a strong tax-paying industry in Ontario has precedent in the production industry. Of course coupled with a federal program the concept could be truly national – but that is a discussion for an entirely different blog.

Following up on successful ideas

Aside from borrowing ideas we need to revisit some good ones. When it was introduced in 2009, the Green Energy and Green Economy Act intended to make home energy audits mandatory prior to the sale of homes, unless waived by the homeowner. This part of the law has never been enforced, so energy audits have not really become a priority and been attractive to home owners – their value to homeowners is still little understood. We  must insist that the real estate industry educate potential buyers on the benefit of knowing a home’ s energy consumption  before purchasing . AND we need to ensure that homeowners understand how energy audits can be a powerful selling tool.

Creating a receptive audience

The discussion of climate change is pervasive in our society and quite misunderstood. Many citizens are confused about “climate change” versus “global warming” and are more focused on whether climate change explains our tough winter, rather than a concern about reducing the overall warming of our planet. Some citizens perceive that pricing carbon might be linked to an increased cost for heating fuels and transportation. But many experts suggest the time is ripe to introduce a carbon market when fuels costs are relatively low.

And I have to agree. CEEA’s 2013 survey of consumers on energy efficiency showed a successful energy or environmental program needed three things in place:
1. Perceived cost savings
2. Environmental motivation
3. Knowledge of how to conserve

I think Ontarians are willing to grasp how the three tie together, now we need to give them the tools to put their knowledge into action.

Posted March 30, 2015

Elizabeth McDonald is president of CEEA