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Engineer expertise needed in cap-and-trade system

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by Lindsey Cole

The Ontario Society of Professional Engineers (OSPE) states Ontario’s intent to create a cap-and-trade system can drive imperative climate action and create new employment opportunities, but it has to be done right the first time and the input of engineers can help.
Engineer expertise needed in cap-and-trade system

OSPE recently released a report entitled "Engineering a Cleaner Economy: Examining Ontario's Carbon Pricing Program and the Role of Innovation," which outlined six key recommendations as to how the province can capitalize on this system by encouraging innovation.

"Our society (OSPE) is all about providing solutions," says Sandro Perruzza, OSPE's CEO. "We can't wait for society to gradually get there. We have to be the instigators of innovation."

The Ontario government announced earlier this year that it will create a cap-and-trade program, linking its auctions with Quebec and California in the Western Climate Initiative (WCI). The intent is to reduce greenhouse gas pollution by imposing a "hard ceiling on the pollution allowed in each sector of the economy," the government notes.

OSPE states in its report that the decarbonization being proposed by the province to reduce emissions by 15 per cent below 1990 levels by 2020, 37 per cent by 2030, and 80 per cent by 2050 will require a "huge amount of technological innovation." With that, there must also be a co-ordinated approach to technology policies, research and innovation.

"Engineers must be involved in the design and maintenance of this technology," the second recommendation notes.

"If engineers are to get involved in shaping the future it has to be in lobbying the government," says OSPE member Yannick Trottier, P. Eng. "We think we have an important role to play here."

What's more, the government should provide incentives for firms for investing in new technologies and innovations.

The report also states cap-and-trade must be implemented in such a way that economic hardship isn't caused for energy-intensive and trade-exposed industries (EITEs).

"Let's be careful how we implement our cap-and-trade. Let's do this intelligently," adds Paul Acchione, P. Eng., who is also a member of OSPE. "There are many choices to be made."

Under a cap-and-trade program, which can also be called an emissions trading system (ETS), the cap is divided into units, or allowances, which are equal to one tonne of carbon emissions, the report explains.

"Government distributes the allowances through a mix of free units and auctions, thus creating the marketplace that enables the 'trade,'" it reads. "Polluters that exceed their allotted allowances must buy extra emissions credits from firms that have reduced their pollution and have remaining allowances to sell. With an ETS, it does not matter which individual polluters lower their pollution levels because reduced emissions are realized at the target level by the de-escalating cap."

Early estimates state Ontario could generate between $1.5 and $2 billion annually from cap-and-trade auction revenues by 2020, the report notes.

With that said, the OSPE is stating this money must be re-invested in "sustainable infrastructure and research and development of green technologies."

"It shouldn't be going to general revenues," adds Perruzza.

In order to "mitigate" financial impacts felt by individual households as a result of a cap-and-trade system, the report also recommends taking proactive measures by following the lead of other jurisdictions.

"Households are significant direct emitters through home heating and transportation, and a cap-and-trade system that applies to the distributors of these fuels will result in the costs being passed on to consumers," it states. "This raises important questions, such as how the program will impact wealth inequality, whether it will make Ontario a more difficult place to live, and how people on low or fixed-incomes will adapt."

Lastly, the report states research and development grants and policies should support small companies or individuals who are willing to embark on pilot projects and new inventions, in addition to supporting established firms.

"The government is moving quickly. It's very fast given the scale of this policy," adds Yannick. "We're talking about quite a huge economic policy decision here."

He says he hopes the OSPE report will provide insight for the provincial government and for engineers as well.

"We want the carbon policy to happen in Ontario," he states. "We hope that members come away better informed — have a better understanding of how this can impact our profession."

OSPE is calling on all engineers, academics, private industry and government officials to work together to design a sustainable and adaptable future for Ontario's next generation, the report notes.

"Engineers are natural problem solvers," Perruzza says. "This (climate change) is the greatest problem facing society. Governments need to engage. This report was our way to demonstrate what we're capable of."

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