Clean Energy Canada | New Ontario-Quebec Agreement Hints Central Canada May Be Warming to Carbon Pricing
November 21, 2014

When the leaders of Ontario and Quebec met this past summer, they planted the seeds of a promising clean-energy partnership. With a joint cabinet meeting in Toronto today, Canada’s two largest provinces harvested the first fruits of that new relationship—and dropped some hints of even tastier morsels to come.

While some news stories zeroed in on what the provinces’ meeting means for TransCanada’s Energy East pipeline proposal, the bigger news for clean energy watchers stems from a new agreement for increased two-way electricity trade.

Neighbours Will Trade More Electrons

Today’s deal will see Ontario supply Quebec with 500 MW of electricity capacity in the winter, when Quebec’s needs are greatest, starting in 2015. As of 2016, Quebec will do the same for Ontario during the summer months, when the latter province sees its demand for power peak.

Ontario and Quebec point to three benefits from this approach: more affordable power for consumers, a more reliable supply, and a reduced need for Ontario to build new power plants after 2020 (or, potentially, to refurbish aging nuclear facilities).

The agreement also commits the neighbours to “investigate” longer-term opportunities to deepen their electricity trade.

It’s a sensible approach that works for both sides. Both have invested in growing their clean energy capacity, so both have an interest in finding appropriate export markets for that power when seasonal variations mean it’s not needed at home.

Ontario Preparing to Take The Carbon Pricing Plunge?

The agreement also signals Ontario’s growing interest in charging a price for carbon pollution, a crucial climate policy tool that Quebec has already adopted.

More specifically, the agreement suggests that Premier Wynne and her cabinet may be warming up to Quebec’s carbon-pricing regimen: under a new Memorandum of Understanding on climate change, Quebec promises to “share with Ontario new information learned from its participation in California’s cap-and-trade program.”

The Western Climate Initiative model Quebec and California have adopted has some strong design features. Because it’s already up and running—and thanks to Ontario’s years as an observer at the table—Ontario could move quickly to adopt that framework if it chose to do so.

Today’s agreement, which includes phrases like “explore strengthening and broadening the use of market-based mechanisms to reduce greenhouse gas emissions,” make it sounds like Ontario is getting ready to take the plunge. Having Canada’s most populous province join Quebec, British Columbia and Alberta in putting a price on carbon would be a huge step for clean energy and climate action in Canada.

A Steady Hand on the Canadian Energy Strategy Tiller

Finally, reprising a leadership role they played at the Council of the Federation table this summer, Quebec and Ontario committed to “ensure” that the Canadian Energy Strategy premiers are scheduled to complete this summer “takes climate-change objectives into account.”

All in, a good day’s work from Central Canada—and there’s good reason to hope this partnership will just keep growing.