A report recently published by the C.D. Howe Institute shows Ontario is looking at a potential $14.8 billion loss on its plans to achieve “net zero” carbon emissions.The report on the impact of budget constraints involving the province’s net zero goals, authored by A.J. Goulding, calculated Ontario’s net zero targets compared to cost projections and money to pay for it to forecast shortfalls. “The need for thoughtful investment in net zero carbon emissions initiatives has never been greater. The purpose of this paper is to assess at a high level the extent to which projected funding needs for energy transition initiatives can be met using existing mechanisms,” wrote Goulding.Sources of funding for its ambitions targets, as dictated by the World Health Organization (WHO) include taxpayers’ dollars, residential and commercial “willingness to pay,” vehicle and heating electrification, electric vehicle gasoline cost savings allocation, and asset replacement, as per the report. The funding totals $14.2 billion — however $29.0 billion is the amount needed. This means there is a potential shortfall of $14.8 billion. “While we are in no way suggesting that the province will choose to fund it, this shortfall represents 7.2% of the 2023 provincial budget, which was $204.7 billion,” wrote Goulding.“This suggests the need for a strong focus on least-cost planning, retaining optionality in system buildout, and sober thinking with regards to the expected pace of heating and transportation electrification. The funding gap can potentially be overcome, but it will be much more difficult to do so if thoughtful planning is not deployed.”To conduct the study, Goulding took the high-level estimates from the Pathways to Decarbonization report to the Minister of Energy, which has the goal of decarbonizing Ontario’s entire electricity system by 2050, and subtracted federal and provincial funding already committed to the target. “Budget constraints for clean energy investments are real, and need to be considered in policy design,” wrote Goulding. “It is important to recognize that notwithstanding the magnitude of the challenge from climate change, resources are finite. The fact that a resource is zero emitting is not in and of itself sufficient to justify buying it; we need to know that it fits within a least-cost, long-run approach to addressing the issue.”“While the cost gap identified here is not insurmountable relative to provincial budgets, better planning and additional funding will be required. Even if no additional funding is forthcoming given Canada’s relatively high tax burden, thoughtful planning can help move Ontario closer to the 2050 target.”
