The Case for a Climate Fund

The Province of Ontario is currently soliciting advice on a new climate strategy to reach its carbon reduction targets of 15 per cent lower than 1990 levels by 2020, and 80 per cent lower by 2050. These are serious targets for a serious issue, and this new climate strategy is a seriously awesome opportunity we can’t afford to miss.

Suppose for a moment that we in Ontario are truly concerned about our future in a steadily warming world. What should we do?

The Province of Ontario is currently soliciting advice on a new climate strategy to reach its carbon reduction targets of 15 per cent lower than 1990 levels by 2020, and 80 per cent lower by 2050. These are serious targets for a serious issue, and this new climate strategy is a seriously awesome opportunity we can’t afford to miss.

Suppose for a moment that we in Ontario are truly concerned about our future in a steadily warming world. What should we do?

It is true there is ample cause for concern. Globally, we may see a four-degree rise in temperature by the end of this century, with radical changes in weather patterns. We are fortunate enough to live in an area that may be spared the worst of the extreme weather, but that does not mean we will be spared the economic and ecological fallout. In this scenario, the outlook is catastrophic at worst, challenging at best. Only the most resilient of economies and societies will be able to withstand the impacts of rising prices for oil, food and other resources.

The actions we take on the climate front can help shift Ontario to a position of energy independence, a lower cost of living and a higher quality of life.

Even if we don’t all agree there is a moral imperative to act to reduce our carbon footprint, we cannot afford to be complacent. Ontario needs to remain efficient and competitive in the face of an uncertain economic future. Ontario is a great place to live, and we must invest in our future if we want to keep it that way.

Climate change presents an opportunity as well as a threat. The actions we take on the climate front can help shift Ontario to a position of energy independence, a lower cost of living and a higher quality of life. We can lower energy bills, support local business and agriculture, design walkable and transit-friendly communities, promote safe cycling and enhance health and fitness across the province. We can do all these things simply by looking at ways we can live better with less carbon.

Carbon pricing is coming

The opportunity to make this happen is before us now. Ontario’s Climate Change Discussion paper notes that carbon pricing is imminent, but what form it will take has not yet been decided. The options include cap-and-trade, baseline and credit, regulations and performance standards, and a carbon tax. Of these, the first three present somewhat similar approaches to setting limits, credits and penalties for large emitters and/or economic sectors. By contrast, a carbon tax sets no cap, but adds an economic cost to the consumption of carbon which can be raised or lowered as necessary to achieve the desired results.

So what route should Ontario take? To be blunt, it will depend on which option is politically viable. Those naysayers and curmudgeons are a strong force and all governments are reluctant to impose new taxes. The soft route is to connect with an existing initiative, and here there really only two viable options: Quebec and California’s cap-and-trade model or the BC carbon tax. Of these two, it’s the carbon tax that offers the best opportunity for innovation.

The BC carbon tax was only politically viable with the commitment that all revenue would be returned to the people. The tax is revenue-neutral – by law, the now $1.2-billion dollars of annual revenue is given back to BC citizens via lower taxes. Of course, the BC climate plan also included incentives for energy audits, solar energy, and fuel-efficiency vehicles, but they were comparatively smaller and many expired in 2014. At this point, BC achieves its results largely through punitive measures.

Ontario can create a climate fund to combine the stick of a tax with the carrot of incentives.

Ontario can significantly improve on the BC model by returning all revenue to the people via incentives and conservation funding instead of tax rebates. In short, Ontario can create a climate fund to combine the stick of a tax with the carrot of incentives.

This tax-and-incent approach means that an Ontario carbon tax can be fully revenue-neutral. A second, equally important principle is voluntary transition. Incentives reward positive behaviour rather than imposing change through regulation. If someone would rather drive a car than take transit or ride a bike, they can continue to do so – and pay the carbon tax which will provide funding for improved transit and bike lanes. As gas prices rise and values change, the infrastructure for transit and cycling will already be in place to make voluntary change that much easier. The more we can make change easy, affordable and desirable, the more likely it is to be lasting.

Voluntary transition requires that we focus on the future we want. This may sound difficult – contentious even – but in reality we Canadians have much more in common than the current political rancour would indicate. From what I have seen, both in Canada and around the world, there is a common desire for a better future and a great place to live. A climate plan may be based on carbon reduction, but the true goal should be to help us live better while reducing our carbon dependency.

A 15 per cent reduction in carbon emissions over 1990 levels will be difficult enough, but there’s no way we can achieve an 80 per cent reduction by any date through a carbon tax and offsetting tax rebate. We will only get there by investing carbon-tax revenue in the infrastructure and initiatives that make for healthier communities, robust local economies and a higher standard of living (with a lower cost of living).

Voluntary social transition is a gradual and long-term process, and will be accomplished only if we restore the role of government and the voluntary sector to lead. Our governments are cash-strapped and budgets for doing good work have been cut to the bone. Funding for Ontario’s voluntary sector has never been worse. Charities and community groups provide excellent value for money, and we need to make them part of Ontario’s climate plan. A climate fund will also give new life to both the public and non-profit sectors.

In short, linking a carbon tax with a climate fund will promote voluntary change, foster innovation, stimulate a green and resilient economy, and reinvigorate government and voluntary sector programs.

A green fund is not new; there many precedents from other jurisdictions. BC flows 100 per cent of municipal carbon taxes back to those municipalities that have signed onto the BC Climate Action Charter and Quebec has a provincial Green Fund which derives its revenue from a carbon market and various environmental taxes and penalties. The opportunity we have in Ontario is to be the first jurisdiction to clearly link a carbon tax with incentives for a better future, and at a significant level.

If we follow the BC example, a carbon tax would be introduced over a five year period, starting at $10 a tonne and working up to $30 a tonne. This would result in an initial climate fund of over $300-million and rising to around $1-billion per year. As to how, precisely, a climate fund should flow these funds back to the people of Ontario, I’d suggest energy conservation and renewable power as top priorities to reduce our carbon footprint, save us money and built energy resilience. Next, I’d look to initiatives that improve our communities at the same time as they reduce energy consumption: transit, cycling, local food and people-centred urban parks, for example. Finally, I’d look to involving communities and the non-profit sector in setting local priorities and funding local projects.

Specifically, these are some of the initiatives a climate fund could support, including several successful programs that were cancelled due to funding cuts:

• a rate reduction on the initial 500 Kwh/month of residential electricity consumption, which would help low-income families in particular
• incentives for fuel-efficient cars and electric vehicles
• subsidies for home-energy audits and investments in home energy conservation
• incentives to purchase home solar thermal and photovoltaic power installations
• seed grants for community power projects
• funding and support for local food initiatives, such as farmers markets and community gardens
• grants for municipal green infrastructure, such as public transit, bike lanes, and urban parks
• core funding for community networks and local funds for priority green projects
• stable funding for voluntary sector outreach and support programs

So let’s suppose Ontario is serious about addressing climate change and creating a better future for Ontario, both at the same time. A climate fund is the only viable way to lay the foundation for positive, creative, cost-effective, and voluntary transition to a resilient, low-carbon future. There really is no other option.

Six months ago, through the Canada Conserves initiative, I released a report on the Next Wave in environmental and sustainability leadership. Key recommendations included reshaping the movement around a positive future, raising new funds, promoting opportunities to help people live better with less and reframing Canada’s climate strategies as a key driver for positive change. At the time, I said that Ontario’s climate strategy review would likely be the first opportunity for strengthen the links between climate solutions and a better future. That moment is upon us.

Once in a generation, we have an opportunity to do something fantastic. This is our opportunity to create a billion-dollar annual fund to invest in our future. We can be a world leader in the finding positive solutions to climate change.

Let’s seize the moment.

Submit comments online, or attend a town-hall-style consultation this month:

• Hamilton March 16
• Guelph March 18
• Aurora March 18              
• Windsor March 19
• Kitchener-Waterloo March 19

(Click here for the full schedule)

Chris Winter usually writes Think Global, an A\J blog about how other countries are dealing with environmental and sustainability issues, and making connections to what we can do in Canada. Read about the opportunity for government to address “wicked” problems like climate change in Prioritizing Policy.