Environmental and Economic Consequences of Ontario's Green Energy Act

The Ontario Green Energy and Green Economy Act (herein the GEA) was passed in May 2009 with the purpose of addressing environmental concerns and promoting economic growth in Ontario. Its centerpiece is a schedule of subsidized electricity purchase contracts called Feed-in-Tariffs (FITs) that provide long-term guarantees of above-market rates for power generated by wind turbine farms, solar panel installations, bio-energy plants and small hydroelectric generators. Development of these power sources was motivated in part by a stated goal of closing the Lambton and Nanticoke coal-fired power plants.This report investigates the effect of the GEA on economic competitiveness in Ontario. It focuses on three questions: (1) Will the GEA materially improve environmental quality in Ontario? (2) Is it a cost-effective plan for accomplishing its goals? (3) Are the economic effects on households and leading economic sectors likely to be positive? The answer to each question is unambiguously negative.It is unlikely the Green Energy Act will yield any environmental improvements other than those that would have happened anyway under policy and technology trends established since the 1970s. Indeed, it is plausible that adding more wind power to the grid will end up increasing overall air emissions from the power generation sector