Executive Summary
Ontario’s emissions peaked in the year 2000, and have been on a decline ever since. This was mostly achieved through ending coal-fired power generation in 2015. By the year 2020, we had reduced emissions by 16% from 1990 levels. The current target emissions reduction for the year 2030 is -20% from 1990 levels—a target that has been quietly revised by the Ontario government twice now. Since emissions peaked in 2000, the emissions of all economic sectors have been declining with the exception of Transportation and Buildings; where emissions have actually increased. In order to achieve our emissions reduction goals, we need to:
Continue the rollout of EV charging infrastructure;
Support a healthy uptake of EVs through incentives and supporting associated services;
Shift the focus from the buildout of more highways to public transportation across densely populated corridors;
Change the Ontario Building Code to improve building performance standards, and
Support the leveraging of real estate assets’ value towards deep energy retrofit projects by asset owners.
Around mid-November of last year, I had the opportunity to attend the Toronto Region Board of Trade's Climate Economy Summit, put on in collaboration with the University of Toronto's Climate Positive Energy Initiative. This was a fantastic event that was impeccably coordinated. Bravo! And thank you.
I walked away energized—even with the full realization of the magnitude of the climate change problem, brought to us by COP27.
The latest IPCC science that kicked off the conference in Sharm El-Sheikh, Egypt noted that we have reached 1.1 °C of warming, and have just about 8 years to reduce Greenhouse Gas #Emissions ("GHG") by over 40% to maintain warming below the 1.5 °C mark - a goal that seems further and further from reality.
To reach our goals, the folks at the Climate Policy Initiative estimate that the world will need about USD$4.3 trillion in climate finance annually (about 2% of global liquidity held by investors in 2020) to "avoid the worst effects of climate change." In 2021, we reached around USD$900 billion, approximately 21% of what we need; of which less than 12% is going to developing countries (we still have not hit that lofty USD$100 billion mark by any measures).
There is an immense opportunity for growth, and a lot still to be done. From 2011 to 2020, annual climate finance flows grew at an approximate 7% CAGR. We need this growth rate to surpass 20% annually [!] for the next 8 years in order to meet our goals outlined above. But, there is good news: the IPCC estimates that we currently have the technologies to at least halve emissions in all sectors by 2030; technologies that can definitely absorb this additionally-needed finance.
So while the size of the problem seems insurmountable at times, the number of opportunities is proportional and positively correlated. This seems to be generally understood by folks working in climate spaces who need to maintain a sense of optimism almost by necessity. That optimism was shared by many of us attending the climate economy summit back in November.
With that in mind, the following article draws on my learnings from the decision makers who attended the Climate Economy Summit, specifically detailing the status quo in Ontario, how we are approaching net-zero by 2050, and some of the key efforts that are currently underway.
Ontario's Emissions & Plans
Apart from being the second largest total contributing province to national GHG emissions, behind Alberta; Ontario is actually the third-lowest per capita provincial emitter at 10.1 t CO2e/capita. Which is 43% lower than the Canada-wide average of 17.7 t CO2e/capita. Similarly, from the peak of emissions in 2000 (~209.2 Mt), Ontario has managed a total decrease of ~28% to 2020. This is the same as an annual decrease of roughly 1.6% during that period. By contrast, Canada has only decreased its overall emissions by 7.5% in that same 20 year period, and had a much later peak of emission in 2007.
Ontario's GHG emissions, National Inventory Report from Environment and Climate Change Canada
So there has been progress. But, not without some devious political backtracking from our leaders.
Back in 2006, Ontario published its first climate action plan, in which it set out to decrease overall emissions to 6% below 1990 levels by 2014. In 1990, overall GHG emissions were roughly ~180 Mt per year, and in 2014 they were ~164.12 Mt, or 91.2% of 1990 emissions. Having achieved our first target, critically through closing all of Ontario's coal-fired power generation, we set out for a new target in 2015. The updated climate action plan laid out the path towards an 80% reduction (below 1990 levels) by 2050. Not quite net-zero by 2050, but I guess we'll take it?
[As an uplifting sidebar, back in December 2022, I met someone who has been living in Toronto for 40 years who pointed out that we used to have close to 30 days of smog warnings in the summertime, which we don't really get anymore. Clearer and healthier summers, proudly brought to you by the end of coal power]
Ontario's Interim Emissions Reduction Targets to 2050, 2015 Climate Change Strategy.
The guidelines were quietly updated in 2018 under the "Made-in-Ontario Environment Plan". The new plan included a downgrading of the 2030 target by 7% (from 37% to a 30% reduction). If that were not enough, the same 2030 target was sneakily revised again in March of 2022. This time, instead of outright setting a new reduction percentage goal, the Government simply published a total yearly emissions target of 144 Mt. You'd have to do the math to figure out that this is now only a 20% reduction in emissions from 1990 levels (vs. a 37% reduction which then turned into a 30% reduction), less than two thirds of what we were originally promised back in 2015. It also represents an extremely meager 3.7% reduction from the 149.6 Mt that the province emitted in 2020—a whole decade to only cut emissions by 3.7%. We can certainly do better than that.
The good news is that if we were able to change policy course 2 times over the span of 6 years, we should be able to do the same in the right direction again. Meanwhile, the province surpassed the interim 2020 target of a 15% reduction by an additional 2%. So, while posturing and politicking on the 2030 target has been in the wrong direction, it seems that both individual and private sector actions have been aligned towards what we actually need.
By Sector
So where can we have more impact with our policy and our actions? What should be the next "let's completely phase out coal power"? (which by the way was crucial in reducing the electricity sector's contribution to total emissions from 26% in 1990 to 2% in 2020).
When we break down the province's emissions by economic sector, an interesting pattern emerges: there has been an overall decrease in emissions from 1990 to 2020 across all economic sectors except for two, Transportation and Buildings. These have been the only economic sectors where we have not made any progress, but rather worsened over time. On the surface, both of these seem directly tied to the population, which increased by around 45% in the same time period.
Source: Greenhouse Gas Emissions - National Inventory Report.
What's more, eliminating the 2020 emissions from both transportation and buildings, roughly 85.46 Mt of CO2e; would get us 75% of the way to our original goal of an 80% reduction from 1990 levels by 2050. Most of the emissions from buildings (around 78%) come from space and water heating, which is predominantly done via natural gas with dedicated intertwined infrastructure that would be hard to replace. The story for transportation is more clear cut with all of us aware that electrification is winning the race when it comes to alternatives. In a way, we are halfway there now with a much cleaner electricity grid, of which 72% is made up of low-carbon emitting capacity (hydro, nuclear, solar, wind, biofuels), and the rest comes from natural gas.
How do we get to where we want to be?
In the second update to the original Climate Strategy published back in 2015, Section 4 is entirely dedicated to how we can reduce emissions across key sectors. Back then, these key sectors were identified as Transportation (35% of total), Industry (28%), and Buildings (19%); still targeting the most problematic sectors. The action plan for Transportation and Buildings included broad items such as:
Encouraging switching from Internal Combustion Engine ("ICE") vehicles to zero-emissions or low-emissions vehicles through building out charging infrastructure.
Building out public transportation to connect high-density urban areas and suburban employment centers.
Encouraging deep energy retrofits at existing buildings through incentive programs, and new net-zero buildings that utilize renewable energy through building codes.
And this is where we are at now in 2023, on each action respectively:
Electric Vehicles (“EVs“) -
Since the first Ontario climate action plan, there has been federal support introduced on both the demand side (e.g., the iZEV program introduced in 2019 which provides up to CAD$5,000 in rebates for select models), as well as the supply side (e.g., through the federal requirement that all new car and passenger trucks sales be zero emission by 2035).
At the provincial level, with Ontario having a relatively strong automobile manufacturing sector (valued at around CAD$13.9 billion of GDP in 2019), the focus has been on the supply side of the equation. The province announced various partnerships with manufacturers including Ford, GM, Stellantis, and Toyota targeting the local production of 400,000 EVs by 2030. There has also been activity on the infrastructure front with projects such as the Ivy Network, a joint venture between Hydro One and Ontario Power Generation, which plans to build 160+ fast chargers across the province, and thus, the largest networks of fast-chargers in the country. The benefit of this ownership model is that the utility (Hydro One) can plan for the expected electricity demand increase from this infrastructure. There was also an announcement back in March 2022 for an additional CAD$91 million to add even more public charging stations throughout the province. As of that time, the province had 1,800 public charging stations for roughly 75,000 registered EVs, which still seems like a low ratio.
The challenge for Ontario will be on the demand side of the equation as we aim to compete with US demand; a lot of the manufacturing partnerships in Ontario were announced pre-Inflation Reduction Act (“IRA”). If you are familiar with the Act, you'll know it includes a massive amount of funding for the energy transition and clean technologies, including tax rebates and manufacturing subsidies for EVs. The challenge for Canada is that the IRA includes production tax rebates for battery production in the US, as well as both a higher new EV tax rebate (compared to the federal one in Canada), and a used vehicle tax rebate. This means that the demand for exports from Ontario into the US will be high and Canadian domestic demand will have to compete.
Path forward: We need to maintain the path with the charging infrastructure buildout, but also turn to the demand side of the equation, and this means:
Increasing federal and provincial support in the form of tax rebates or subsidization;
Purposefully building out services for EVs through the product life cycle (EV mechanical services and parts, EV dealers and sales, end-of-life disposal and recycling); and
Critically improving education on the subject matter. It seems that most people still just think of the immediate upfront cost on the vehicle (granted the short-termism might just be inherent to our fast capitalism society), but we need to really shine a light on the fact that EVs are actually cheaper on a levelized cost basis over the lifetime of the vehicle (due to lower costs on fuel, repairs and maintenance).
Public Transportation -
If I had a dime for every time someone in Toronto has complained to me about public transportation in this city, I probably would not be writing this article… or maybe I would be, just from a beach somewhere instead of winter in Toronto. It might not be a surprise to those of you in Ontario that the Progressive Conservative Government, which is now into its second term, has prioritized passenger-vehicle transportation and focused on long-term public transportation projects with a limited chance of interfering with car lanes. From the onset of Doug Ford's re-election campaign in 2022, there were promises to increase highway capacity as well as build more highways (Highway 413 and the Bradford Bypass) to avoid the congestion that has become synonymous with the Greater Toronto Area. This is a popular political promise that no longer holds any ground, as many studies have shown that as you increase road capacity, road traffic demand just goes up in tandem (termed "induced demand"), and almost at a complete 1:1 ratio. So really, if your aim is to relieve traffic congestion, you are better off increasing public transportation capacity along dense corridors in the province.
To the credit of the government, and maybe igniting frustrations elsewhere in Ontario, there ARE plans in place to improve critical public transportation services like the Subway Transit Plan for the GTA in the Greater Golden Horseshoe (just slightly larger than the GTA). Which aims to add approximately 40 km of subway lines at a projected cost of CAD$28.5 billion, in addition to a number of Light Rail Transit extensions planned through the GTA. Metrolinx and the Government of Ontario are also partnering to improve GO trains, which are the main passenger commuter trains in Southern Ontario; they seek to be able to provide two-way, all-day service every 15 minutes over the core segments. More importantly though is the plan to electrify the whole fleet of GO trains by 2030.
But while all those public transportation plans are in place for the Greater Golden Horseshoe, the rest of Ontario just gets more highways:
Summary of 2022 Transportation Plans across Ontario. Source: February 2022 GGH Transportation Plan.
Path Forward: The biggest obstacle in Ontario has been the speed at which things get built with regards to public transportation. The Eglinton Crosstown Light Rail Transit extension has become emblematic of this issue: the project began in 2011 and was scheduled to complete in 2020, but we are now into our third delay of that project which now has an indeterminate delivery date! Apart from the delays, the project now has a projected cost of CAD$12.8 billion, when the original price tag was closer to CAD$5.5 billion (it's hard not to laugh at this point). I think it's safe to say that improving our efficiency in the development of public transit infrastructure needs to be part of the equation.
Without writing a whole article on transportation alone, the keys to success in Ontario need to include:
Improving construction efficiency;
Electrification (and expansion) of long-haul passenger transit; and
Shifting the focus away from more highway building towards expansion of transit along dense corridors.
Deep Energy Retrofits -
This is one area that I am more intimately acquainted with, and actually one of the motivating factors for the creation of The Decarbonomics Initiative. After working for just under 4 years on Building Science consulting in Seattle and then in Toronto (2016 - 2020), it became very clear that Ontario lags behind both the policy-guiding of more energy efficient buildings, as well as developer interest and appetite. There are several reasons why this is the case, but if I was to summarize it into two points, they would be:
A poor building code, and
A lack of accountability on developers due to predominant business and financing models, combined with a lack of understanding and information on energy efficiency.
I'm also sad to report that nothing has been done on what is arguably the most important lever: the Ontario Building Code ("OBC"). The last two updates, in 2017 and most recently in 2022, mean that there will be no change to standards of building performance compared to the 2015 version. This is disappointing especially within the context of the province being a signatory to the 2016 Pan-Canadian Framework on Clean Growth and Climate Change, through which they committed to having a net-zero energy building code by 2030. Some analysts are even saying that the latest version—which essentially adopts the lowest energy efficiency performance standard of the model national building code—actually means some regression on performance standards for windows, doors, and insulation from the previous OBC. This will not only worsen the climate performance of the province, but will affect climate resilience for residents and ultimately increase costs to taxpayers as energy bills go up.
This is not to say that nothing has been implemented in Ontario. There are a number of voluntary incentive programs like the Independent Electric System Operator's ("IESO") "Save ON Energy" program, which provides incentives for qualifying deep energy retrofits on industrial, commercial, institutional, social housing, and multi-family residential buildings. Some of these incentives can cover up to CAD$1,000,000 or 50% of eligible project costs. This is all part of the new Conservation and Demand Management Program, which also includes measures such as an incentive program for homes with central air conditioning, and support for greenhouses. The IESO estimates that the program will create about CAD$650 million in system cost savings over the lifetime of the measures—this is what investing in energy efficiency does.
Path Forward: We critically need to address building energy use efficiency both in Ontario and across the country. To meet Canada's goals of an emissions reduction of 40-45% by 2030 (from 2005 baseline), the residential sector alone will have to reduce its emissions by 63% over the next seven years. At the same time, it is estimated that 75% of current residential buildings will have to undergo deep energy retrofits by 2030 to meet the national targets. For us to get even close to that, we need to:
Incorporate more stringent energy performance standards in the building code— measures that pay back to the economy;
Improve the education around energy efficiency so that asset owners and final end users demand more from developers;
Maintain the pace and support through the targeted incentive programs; and
Create financial products, or provide education for asset owners to leverage the capital of their asset in order to pay for deep energy retrofits that are bound to pay back in a short period of time. This is a similar model to what the IESO is doing with their incentive program and it is truly a no brainer. If the perpetual energy costs savings can cover the upfront capital investment over time and still deliver positive returns afterwards, then the investment obviously has a positive net value.
In Conclusion
We have our work cut out for us in Ontario to align with national commitments, which does not seem likely to happen without radical change. Even if we don't meet national goals, we must still hold our leadership accountable to remain transparent on our plans and to implement measures that will both align with our long-term climate strategy and create savings for taxpayers through the creation of better systems, such as less congested highways (can you imagine?). The two sectors of Transportation and Buildings are crucial everywhere, and will absolutely have to be part of decarbonization plans and strategies the world over. The good news is that we don't only have to rely on policy and governments to make change happen, we can take on the task ourselves through our businesses and civil society. If decarbonization makes economic sense, and social sense, then we just have to point in order to mobilize private capital.
Comments