How many times have you heard political pundits say that the public supports climate action, so long as it doesn’t affect their pocketbook? This claim is based on a false assumption that climate action is unaffordable, and, unfortunately, this “myth of unaffordability” leads many political leaders to be too timid when it comes to properly financing climate change mitigation. We’re here to show the skeptics that investing in climate change mitigation, if done right, is actually a smart financial decision paying huge dividends.
To debunk this myth, we will dive into the findings of a recent report titled “Energy Evolution: Ottawa’s Community Energy Transition Strategy”. Energy Evolution is Ottawa’s road map to achieving a 100% reduction in greenhouse gas (GHG) emissions below 2012 levels by 2050 (or what is commonly known as net-zero). This report goes a step further than usual by not only saying what the city of Ottawa needs to do, but also how much it will cost.
Energy Evolution identifies a total of 39 actions required across five sectors (electricity; transportation; waste and renewable natural gas; and existing and new buildings) for the city of Ottawa to achieve net-zero by 2050. Of interest, it identifies the following five actions as the highest priority:
- electrify personal vehicles
- retrofit residential buildings
- divert organics and create renewable natural gas
- retrofit commercial buildings
- transition to zero-emission commercial fleets
Combined, these five actions alone account for more than 80% of projected cumulative GHG emission reductions required to achieve net-zero by 2050.
So how much will it cost Ottawa to implement this plan?
Energy Evolution projects that community-wide capital investments of $57.4 billion are required between 2020 and 2050 to implement the 39 actions required to achieve net-zero.
That’s a big chunk of change. But fear not, because big savings will quickly follow—and this part of the financial equation is often overlooked by political pundits. Energy Evolution projects savings of over $145 billion over the next 30 years, which is almost three times higher than the capital investments!!! How often do we see an almost 150% return on investment? The breakdown of savings is as follows:
- Operations and maintenance savings for electric technologies including vehicles ($22.6 billion)
- Energy savings ($70.9 billion)
- Carbon price savings ($13.4 billion)
- Revenue from local energy generation such as diverting organics from the landfill to produce renewable natural gas ($38.2 billion)
So what does this all mean for Ottawa?
Implementing the 39 recommended actions in Energy Evolution will result in a community-wide net return of $87.7 billion by 2050. As noted by city staff, “We see that net benefit because we’ll be so much more efficient, as a city and community as a whole.” The city’s share of the $87.7 billion in savings and revenue can then be redirected to other priorities including property tax reductions for residents.
So what’s the catch?
Reaping the long-term financial benefits of Energy Evolution will require some short-term sacrifice. The strategy requires higher up-front investments in the first decade for public infrastructure, buildings, vehicles and renewables, with a projected net financial benefit starting in 2032, when annual savings and revenues exceed capital investments. This means that although the city will turn a profit starting in 2032, we need to spend a bit now to get a lot later.
So where’s the money coming from?
Funding implementation of Energy Evolution will require unprecedented municipal investments of $621 million per year over the next decade. To date, the only municipal investment has been $2.6 million from the Hydro Ottawa dividend surplus in 2020, which is less than half a percent (0.5%) of the annual investments that Energy Evolution calls for.
The city of Ottawa urgently needs a comprehensive financing strategy to address the funding gap for Energy Evolution. The city should consider a mix of creative solutions both within and outside the bounds of traditional city financing modes including:
- Expand the city’s Green Debenture program to cover Energy Evolution projects. The program uses green bonds to finance capital works that promote environmentally sustainable development across the city to mitigate or adapt to the effects of climate change and/or contribute to the reduction of GHGs.
- Consider revolving loan funds for climate projects. Here, savings from investments in Energy Evolution projects can be captured and reinvested to reduce the need for new finance or boost available finance. Revolving funds are already being used to finance green projects around the world, for example, the Thai Energy Financing Revolving Fund. This is an especially appealing option given the current record low interest rates.
- For projects that do not offer a financial return on investment, the city could use other revenue streams such as development-related charges and parking and road-based fees.
- Accessing large pots of federal and provincial funding to support Ottawa’s energy transition.
- Adopting a climate lens for all of the city’s financial decisions. This practice would discourage the city from funding projects that enhance the city’s carbon footprint, such as road expansions, and instead redirect that funding to Energy Evolution projects.
Contact your Councillor to ask the city to address the funding gap for Energy Evolution by supporting these financing measures!
Written by Adaku Echendu and Ana Araujo
Adaku Echendu | We all have a role to play in making the universe whole, just like the tiny pieces in a puzzle.
Ana Araujo | An advocate for a more green and sustainable future, at home and internationally.