Unaffordable: the cost of Ottawa’s climate plan

No analysis in the plan, no way of knowing what the real costs might be, says energy economist Robert Lyman

CITY OF OTTAWA CLIMATE PLAN- THE FINANCIAL CONSEQUENCES

By Robert Lyman

Introduction

The Climate Plan approved by the Ottawa City Council is based on the Energy Evolution documents prepared by its consultant, Sustainable Solutions, for attaining the goal of “net zero” carbon dioxide emissions by 2050. The Council’s approval of the plan does not mean that it has approved a budget. In fact, the document submitted to Council states explicitly that “all information presented represents high level estimates that are currently uncommitted and unfunded capital and operational needs.”

The Estimates

Nonetheless, the financial analysis in the plan offers an “order of magnitude” estimate of what implementing it would cost the City and its residents over the period from 2020 to 2050. The analysis projects that the cumulative community-wide expenditure from 2020 to 2050 will total $52.6 billion, with a present value of $29.7 billion. All of this is above and beyond the expenditures that are currently underway or planned. The analysis states that the returns from this investment will be $87.7 billion (unexplained) but only $12.4 billion when discounted to 2020 dollars. In other words, the net cost of the plan is estimated by the consultant to be $17.3 billion. In normal economic analysis of public policy measures, this would be a clear signal to not proceed with the plan.

There is no analysis of the costs per tonne of carbon dioxide emission avoided. In other words, there is no way based on the consultant’s analysis to know whether the proposed expenditures are cost effective compared to other options, or to make sense in terms of the alleged value of the emission reductions.

The plan foresees annual community-wide expenditures of approximately $1.6 billion per year net present value for the decade 2020-2030. Of this, $581 million per year net present value would be spent on transit and “active transportation” (bicycle and walking path) infrastructure and an additional $40 million per year net present value for municipal building retrofits, the zero-emission non-transit municipal vehicle fleet, and methane production from landfill and other sources.

Sources of Funds

The consultant acknowledges that Ottawa will not be able to meet expenditures of this size alone. It therefore assumes that a substantial (but unstated) amount of funding will come from the federal and provincial governments. This assumes, of course, that governments that support such high “climate emergency” expenditures will be in power for the next 29 years. Otherwise, the full funding obligations would have to be borne by city taxpayers.

The plan includes suggestions for several additional taxes and fees that could be imposed on city residents, the largest of which are road tolls ($1.6 billion) congestion charges ($388 million), development charges ($234 Million), road user fees ($188 million) and land transfer tax increase ($130 million). No doubt, the imposition of such charges will create some controversy.

Context

The City of Ottawa Budget for the 2021 fiscal year anticipates the spending of $4.3 billion. The proposed Climate Plan expenditures thus would increase that total by 37%. Even if the federal and provincial governments contributed half the Climate Plan funding, an extremely optimistic assumption, Ottawa taxpayers would be required to pay (one way or another) about $800 million per year, or 19% more than they now pay annually.

The magnitude of the spending anticipated over the 2020-2030 period is even more striking when compared to the city’s present sources of funds and current spending allocations.

Ottawa’s projected revenues from property taxes, the largest single source of funds, in 2021 is $1.85 billion. The Climate Plan expenditure of $1.6 billion per year would absorb 86% of that.

The largest spending item in the 2021 municipal budget is $746 million to be spent on community and social services. The Climate Plan expenditure would be equal to more than twice that.

The second largest spending item in the 2021 municipal budget is $647 million to be spent on transit. The Climate Plan expenditure would be equal to two and a half times that.

The main financial impact on an individual resident of Ottawa would be through a massive increase in the cost of owning and operating a vehicle; the plan marks an intensification of the City Council’s longstanding war on cars and car owners. If one could portray it in terms of a property tax increase, for each of the next ten years the owner of a house with an assessed value of $400,000 would see his or her property tax rise from $4,035 per year to $4,780 per year assuming senior government aid or to $5,528 per year without senior government aid.

If the costs of taxes and fees rise high enough, people will not be able to afford to live in Ottawa and they will simply move elsewhere, even if it means moving to communities just beyond the city’s boundaries.

Driving people out of Ottawa would, of course, help to reduce emissions.

Thanks to Robert Lyman for this article—Ottawa Wind Concerns

ottawawindconcerns@gmail.com

This article is reposted from ottawawindconcerns.com