Ontario is proposing to create a regulated clean energy credit trading system. The move is in response to progressive businesses that want access to clean electricity. They’re willing to pay a premium for clean power in order to meet their corporate climate commitments. Sounds good right?
The problem is the Clean Energy Credit system proposed by the government won’t lead to cleaner electricity. In fact, as designed, it is certain to increase emissions from electricity generation! How can clean energy credits increase carbon pollution? Because of two fundamental flaws in the proposal.
The first flaw is that none of the credit revenue will go towards new clean power projects. Existing clean power facilities will be eligible to generate credits for continuing to produce power. Since Ontario has more than 27 gigawatts of non-fossil power generating capacity, there is a virtually unlimited supply of clean energy credits from nuclear and hydro facilities built decades ago. Since these facilities already operate 24/7 under contract to the province, allowing them to sell clean energy credits doesn’t increase the supply of clean energy. Carbon emissions are “reduced” on paper for companies that buy credits, but there are no actual emissions reductions. Knowingly or unknowingly, businesses will be buying fictitious credits for clean energy that would be produced with or without their credit purchase.
The second problem is what the clean energy credit revenues will be used for. The province is proposing that proceeds be used to subsidize electricity rates. So, companies pay a green premium to claim dubious emissions reductions, and the money makes dirty power cheaper for everyone else. But economics 101 tells us that further power subsidies (on top of $6.9 billion in annual subsidies already) will only increase electricity consumption. And right now, natural gas is the marginal source of supply for any new demand. So, more electricity demand, without additional clean energy supply, means more carbon pollution from natural gas power plants.
Carbon pollution from gas power plants is already forecast by the province to increase 316% by 2030, and the proposed clean energy credit system will only steepen that increase. Thankfully, there is a simple way to fix the proposal. Require all credit revenues to be invested in new clean energy projects. This would ensure the system actually leads to cleaner power by stimulating new investments in clean energy infrastructure. New investments in clean energy will reduce emissions while supporting long-term energy affordability.
Selling unreliable clean energy credits and using the money to subsidize more consumption of fossil gas power is not the path to clean and affordable energy. Ontario needs to fundamentally rethink this proposal, or abandon it altogether.