On behalf of the 2,500…

On behalf of the 2,500 direct members Canadian Manufacturers & Exporters (CME), the tens of thousands of manufacturers across Ontario and the nearly 780,000 employees, we are writing to express our support of Bill 4, The Cap and Trade Cancellation Act, 2018.

Manufacturing is critically important to Ontario. In fact, it directly accounts for nearly 12 percent of GDP, 80 percent of exports, and nearly 800,000 direct jobs. Manufacturers generate significant economic spinoffs throughout the economy and Ontario’s communities, including in natural resources, food processing, technology, and every service sector from banking to logistics. Factoring in these economic spin-offs, manufacturers drive nearly 30 percent of all economic activity, 25 per cent of all jobs, and one-third of all government revenues.

Since 1990, manufacturers in Ontario have significantly reduced GHG emissions and have done so while increasing output and thus, continuing to be to be a significant contributor to the economy of Ontario. The evidence of the past 25 years clearly shows that improvements in environmental performance and economic growth are in fact are co-dependent. As investment in new machinery and equipment increases, companies are more productive, and emissions and energy intensity decrease. At the same time, these investments make manufacturers more competitive, enabling companies to invest further in their workforce, and in new products and technologies, as they expand their business.

Over the last several weeks, CME has been consulting with our members on this piece of legislation as well as a vision for Ontario’s Climate Change Action Plan going forward. Our sector is respectful of the Government of Ontario’s decision to wind down the cap-and-trade program in Ontario. We believe this piece of legislation has the potential in the long-term to help enhance the competitiveness of our sector while a new Ontario Climate Change Action Plan could assist with the reduction of GHG emissions through new innovative ideas. As legislative proceedings continue with respect to the Bill, we ask that the Government of Ontario consider the following as it obtains input and recommendations from industry on the legislation:

Proceed with an orderly wind-down of cap-and-trade program:

The continued wind down of the cap-and-trade program must continue to be transparent and conducted in an orderly fashion with clear rules and objectives, enabling regulatory certainty and clarity for the manufacturing sector. This is critical to ensure that the competitiveness of Ontario’s manufacturing sector is protect and companies can move forward with decisions that impact their day-to-day operations.

Ensure fair reimbursement for participants who purchased allowances under the cap-and-trade program:

We recommend that Sections 6, 7 and 8 of the bill be amended to ensure those Ontario capped market participants can be fairly reimbursed for allowances purchased for the intended purposes of fulfilling a compliance obligation in the first compliance period in full at a reasonable market rate.

There were many Ontario businesses that purchased trading allowances within the Western Climate Initiative (WCI) market or co-invested in programs financed by the cap and trade program. During our consultations, some members expressed concern that investments may not be kept whole and recovered appropriately, which could result in unintended consequences related to consumers and businesses accumulating additional costs. The current methodology as described in sections, 6, 7 and 8 of the Bill, effectively renders any allowances purchased in auction or through a third party (who purchased the allowances at auction), will penalize certain sub sectors of manufacturing (i.e., agri-food and steel) who acted in good faith following the rules of the cap-and-trade program at the time the rules were written.

Authentic Consultation on a Go-Forward Basis:

The best time for consultation is early in the process before steps have been taken that set the overall course of action. Authentic consultation will be critical on a go-forward basis to ensure that sound, balanced environmental policies are enacted to benefit Ontario’s manufacturing sector. CME believes that it is important to ensure that timely authentic consultation with impacted stakeholders on environment issues that materially impact the overall competitiveness of the manufacturing sector is reinforced and welcomed. We believe that consultation provides an opportunity for stakeholders to identify areas of concern or potential unintended consequences with government proposals prior to their finalization or implementation. How manufacturers are consulted can vary, however our sector has a history of providing sound, informed and practical opinions and advice.

A Climate Plan for Ontario’s Manufacturers - Resiliency, Adaptation and Mitigation:

An Ontario Climate Change Action plan must take into consideration the following comparative advantages of the province: tax competitiveness, low carbon energy and a robust manufacturing sector. The plan design must limit the regulatory burden of reporting, verification and meeting compliance targets with the premise that climate change needs to be treated in an integrated fashion with other environmental issues such as air, waste and water. It must also be focused on resiliency, adaptation and mitigation while also being tied into environmental sustainability and being integrated with other financial instruments such as tax incentives, technology adoption, and investment supports.

A broad mixture of measures will be critical to effectively achieving the Government of Ontario’s stated environmental and economic goals. As part of the consultation process on the plan, we recommend establishing a joint government-industry task force to achieve an Ontario Climate Change Action Plan that creates new incentives, jobs and achieves new economic prosperity, while maintaining strong environmental performance.

In particular, incentive programs must be in place to complement achieving targets. The purpose of incentives is to improve energy efficiency, reduce GHG’s and improve the overall competitiveness of Ontario industry to compete on a global platform. If the Government of Ontario chooses to set non-voluntary targets, incentives need to be considered so industries can invest in new technologies and achieve a reasonable rate of return for those investments. Regardless of the GHG reduction program (voluntary or not) the Government must recognize fixed process emissions that industry cannot reduce with existing technology. This was done well in the previous cap-and-trade program and should be revisited in future programs. We believe that a one-size fits all approach will not be effective in delivering sustained progress on GHG reductions and improving economic competitiveness in Ontario. We must ensure that a new Ontario Climate Change Action Plan allows manufacturers to maintain strong environmental performance records within their facilities. At the same time, manufacturers must not accumulate unnecessary costs that will harm their ability to increase investment in Ontario and create new manufacturing jobs.

Thank you for your ongoing commitment to strengthening environmental performance in Ontario’s manufacturing sector. We look forward to working with the Ministry of Environment, Conservation and Parks to creating a robust climate change policy framework that reduces greenhouse gas emissions in line making Ontario the engine of Canada’s economy once again.