Source: http://www.fin.gov.on.ca/en/budget/ontariobudgets/2016/ch1a.html
Timestamp: 2016-07-01 00:46:05
Document Index: 262372130

Matched Legal Cases: ['art 1', 'art 1', 'art 1', 'art 1', 'art 1', 'art 1', 'art 1', 'art 1', 'art 1', 'art 1', 'art 1', 'art 1', 'art 1', 'art 1', 'art 1', 'art 1', 'art 1', 'art 1', 'art 1']

Chapter I, Section A | 2016 Ontario Budget
Economic uncertainty is again challenging much of the world. The price of oil has fallen considerably, along with the Canadian dollar. While these developments pose considerable challenges for many other parts of Canada, when combined with the factors underlying the province’s economic strengths, they provide Ontario manufacturers, exporters and the services sector with opportunities to grow their businesses and create jobs.
When the global recession began to hurt the Ontario economy and employment in 2008, the government put a plan in place to protect and create jobs. The marginal effective tax rate on new business investment was cut in half (see Chart 1.6) and the costs of doing business, including red tape, were lowered. Thousands of Ontarians who had been laid off were retrained with new skills. Investments were made to retain thousands of jobs threatened by the global recession and financial crisis, particularly in the auto sector. The plan is working. Since the low point of the recession, Ontario has more than recovered all of the jobs lost and the province has become one of the leaders driving Canada’s economic growth. By 2019, Ontario is on track to create more than 900,000 net new jobs since the depths of the recession. The province’s unemployment rate has declined from 9.6 per cent at the depth of the global recession to 6.7 per cent currently, which is below the national average.
The province continues to be an attractive environment for business investment. In 2015, for the second year in row, Ontario was ranked first in North America for foreign direct capital investment by fDi Intelligence, the research division of the Financial Times Ltd. International companies choose to invest more in Ontario than in any other place in North America. Leading global companies prefer to do business in Ontario because of its competitive tax system, highly skilled and trained workforce, and stable financial markets. These investments propel economic growth and job creation in the provincial economy. In 2015, Toyota invested $421 million to upgrade and expand capacity at its motor vehicle assembly plants in Cambridge and Woodstock, creating and retaining more than 8,000 jobs.
To ensure continued economic growth and job creation, Ontario must accelerate the transition to a knowledge-based economy, where it will compete and succeed based on its skilled workforce, innovative businesses and higher value-added activities. Ontario’s Competitive Business Environment Is Attracting Knowledge-Based Companies
Google Canada announced an expansion of its workforce in Waterloo to 400 workers, up from four workers 10 years ago. Its new Waterloo facility has the capacity for 1,000 employees.
Microsoft Canada announced the opening of a new data centre in Toronto.
Ottawa-based Shopify, a leading e-commerce platform, announced the opening of a new office in Waterloo that will employ 300 workers.
DataWind, a developer of wireless web-access products and services headquartered in Mississauga, announced a new Netbook for the Indian market designed in Ontario. To build on these strong fundamentals in Ontario’s business environment, the government continues to take positive steps to further support economic growth and job creation. That is why the Province is fostering a more innovative and dynamic business environment — to establish the conditions for a growing economy, well-paying jobs, a higher standard of living and sustainable public services.
The Province is building on its economic plan by:
Moving forward with the Business Growth Initiative;
Investing in a growing low-carbon economy and becoming a global leader;
Reducing business costs and burdens while maintaining a competitive tax environment;
Supporting the sharing economy;
Promoting social enterprises; and
Implementing a modern and flexible approach to financial services regulation. Business Growth Initiative
Creating a more innovative economy is part of the government’s economic plan. The government has made significant investments to create a more highly skilled workforce, supported world-class research at Ontario’s postsecondary institutions, provided significant support for research and development (R&D) and other innovation-related activities, and encouraged the founding of more startups and innovative small and medium-sized enterprises (SMEs). Together, these investments have resulted in the emergence of many exciting companies across the province that are poised to become global leaders.
The Business Growth Initiative is the government’s new strategy to increase the province’s global competitiveness. It will build on Ontario’s existing strengths and oversee the province’s shift towards new areas of economic growth in the knowledge economy. The strategy will commit $400 million over the next five years and leverage Ontario’s highly skilled workforce to compete through innovation. It includes the following elements: Creating an Innovation-Driven Economy — The Province will help to accelerate Ontario’s transition to the 21st century, innovation-driven economy that thrives on the initiative, creativity, education and skills of its people. The government will make significant investments in innovation and R&D, including the commercialization and adoption of new disruptive technologies.
The Need to Scale Up: Catapulting More Ontario Firms into Global Leadership — The Mowat Centre has found that 20 per cent of the Canada–U.S. productivity gap can be explained by the Canadian economy’s composition of many more small firms than large ones.1 Helping Ontario’s small and medium-sized firms get access to the capital, resources and expertise they need to grow will help turn more of Ontario’s small and medium-sized businesses into larger, globally competitive exporters.
Modernizing the Regulatory System and Lowering the Cost of Doing Business — Ontario is establishing new tools to build a smarter regulatory environment that will remove unnecessary red tape and make government rules easier to follow. Creating an Innovation-Driven Economy
Through Budget Talks, a recurring theme was building a more innovative economy. The Province is moving forward, through its Business Growth Initiative, with new programs aimed at furthering R&D, commercialization and the adoption of disruptive technologies to help Ontario-based firms.
The government has undertaken critical investments to support innovation in Ontario. This includes support for the Ontario Network of Entrepreneurs and other programs to increase industry–academic collaboration, to which the government has already committed more than $260 million of continued funding over the next five years. Support for the Ontario Research Fund has also helped strengthen research excellence at the province’s world-class postsecondary institutions and research hospitals.
These investments have helped Ontario prepare for and contribute to a rapidly growing tide of disruptive technological innovations that are quickly displacing established business models and bringing significant and permanent change to the global economy. In Ontario, and elsewhere around the world, these new technologies are already disrupting the status quo by altering the way people live and work. A recent study by Deloitte found that more than one-third of Canadian firms are wholly unprepared for disruption to their industries and 43 per cent of firms believe they are better prepared than they actually are.2 Ontario firms must be prepared to adapt and thrive in an era of disruptive innovation. That is why Ontario, through its Business Growth Initiative, will focus on fostering the development and commercialization of disruptive technologies and their adoption throughout its key economic sectors. The Province is currently undertaking a comprehensive review to determine its areas of strength in the development and adoption of disruptive technologies and their potential impact on improving Ontario’s workforce and productivity. While work continues on the review, there are strong indications that Ontario has the potential to bolster its leadership in the fields of artificial intelligence, quantum computing and regenerative medicine.
Ontario is taking steps in this Budget to build upon its R&D capacity in innovative technologies by:
Investing $50 million at the Perimeter Institute, a world-leading research centre for theoretical physics, to provide funding through 2020–21. Its research will help foster the next generation of information technology advancements in areas such as quantum computing.
Investing $35 million over the next five years to establish a $50 million partnership in the Advanced Manufacturing Consortium. The Consortium will include three Ontario universities — McMaster, Waterloo and Western. This industry–academic collaboration will focus on long-term industrial innovation projects to make Ontario a leader in fields such as additive manufacturing and digital components and devices.
Supporting competitiveness and job creation in key industry sectors by partnering with colleges to establish a $20 million fund to be invested over three years. This fund will better connect colleges and Ontario companies on applied research projects that result in breakthrough products and services for sale at home and abroad.
The Province’s Business Growth Initiative will also enhance the development, commercialization and adoption capacity of key sectors through new programs and initiatives. Clean Tech The government is exploring ways to leverage investment in the clean tech sector to mobilize private capital, decrease greenhouse gas (GHG) emissions and grow the sector to create jobs in Ontario. Ontario will commit $55 million to develop new approaches to make investments in exchange for equity in clean tech firms. This approach is a means to share in the increased value of companies as they grow and succeed. Through its recently announced Green Investment Fund, Ontario will also spur investment and innovation in clean tech solutions by committing $74 million to develop and demonstrate solutions to large emitters that face barriers in reducing GHG emissions. (See later in this chapter for details on the Green Investment Fund.) Automotive
Ontario’s knowledge-intensive auto sector is well placed to take advantage of new technologies and trends. The Province has significant R&D resources, with over 24 auto-focused public research facilities. To capitalize on this potential, Ontario recently became the first Canadian jurisdiction to allow the on-road testing of automated vehicles.
Ontario is already investing $20 million to build more public charging stations for electric vehicles. The government has also introduced a new Electric Vehicle Incentive Program that will reduce GHG emissions and make it easier for Ontarians to switch to electric vehicles.
Through the Business Growth Initiative, Ontario will invest $15 million over four years to boost the competitiveness of the sector by:
Investing $5 million over two years to establish an Automotive Supplier Competitiveness Program to strengthen the technological capabilities of small and medium-sized auto parts firms; and
Committing $10 million over four years to the Canadian Urban Transit Research and Innovation Consortium to support R&D and commercialization of technologies such as lightweighting and autonomous software, in partnership with the federal and Quebec governments.
Ontario has a diverse biotechnology sector, with strengths in agricultural, medical and biochemical technologies. Biotechnology firms rely upon living materials for the creation of different products and services, whether food, medicines or chemicals. Ontario will invest $3 million over four years in Bioindustrial Innovation Canada to accelerate the growth of southwestern Ontario’s bioeconomy and biochemical sector. This funding will support the commercialization of industrial biotechnologies and will leverage federal funding.
Supporting Ontario’s Innovation SuperCorridor
Ontario’s Innovation SuperCorridor extends from London and Waterloo region in the west through Toronto to Ottawa in the east. Together, the corridor represents Canada’s most innovative region, with dense pockets of startups, research institutions and world-class talent. To ensure its continued success, Ontario will work with partners to enhance the connectivity of the corridor, enabling it to compete fully against the world’s biggest technology hubs. For example, this includes working with Metrolinx and freight partners to explore potential improvements to GO rail services along the Toronto–Kitchener corridor.
The government recently appointed the Honourable David Collenette, former federal transport minister, as a special adviser to assist in bringing high-speed rail to the Toronto, Kitchener–Waterloo, London and Windsor corridor as part of the Province’s Moving Ontario Forward plan. To inform his advice, Mr. Collenette is working with private-sector stakeholders, municipalities and First Nations and Métis partners. Consultation sessions started in February 2016 and Mr. Collenette will provide his advice to the Province in fall 2016. Ontario continues to invest along the SuperCorridor to enhance its innovative capacity, including new funding as outlined above for the Perimeter Institute, and establishing the Advanced Manufacturing Consortium. The government is also focused on the role of postsecondary education as a key driver of economic growth and jobs in the new economy. To continue strengthening the innovation SuperCorridor, the Province will invest $15 million in the University of Toronto towards the Centre for Engineering Innovation and Entrepreneurship. This support will help the expansion of experiential learning opportunities for engineering students, including cooperative learning. Industry-Led Partnerships
Through the Strategic Partnerships Stream of the Jobs and Prosperity Fund (JPF), the government will accelerate the development, commercialization and widespread adoption of made-in-Ontario disruptive technologies. The Strategic Partnerships Stream will explore funding industry-led partnerships and consortia focused on spurring the adoption of these technologies and the development of next-generation products and services, including: The development and testing of connected vehicles — cars that drive themselves and communicate with each other and their surroundings, requiring intensive computing power;
Supporting the development and testing of fifth-generation (5G) wireless technologies; and
Increasing Ontario’s capacity for smart manufacturing through better integration of information and communications technologies.
Helping Ontario Businesses Scale Up
While Ontario is home to dynamic entrepreneurs and many cutting-edge companies, the province lags the U.S. and many other advanced economies in its share of medium-sized and large firms that comprise the economy. This is important because larger firms tend to be more productive, export-oriented and pay higher wages, on average. For this reason, the Province is taking action to help scale up more Ontario firms by enhancing access to capital and establishing new programs that will focus on fostering accelerated growth — concentrating resources on young companies that have demonstrated success and have great potential.
Research from Statistics Canada suggests that the concentration of small firms in Canada contributes to the productivity gap between Canada and the United States. The share of small firms is larger in Canada than in the United States, and productivity differences between small and large firms are greater in Canada than south of the border.
Source: Statistics Canada, “Canada–United States Labour Productivity Gap across Firm Size Classes,” (2014). Access to Capital
Access to capital plays a key role in scaling up entrepreneurial firms, which helps them grow into medium-sized and large companies, and results in more employment for Ontarians. For this reason, the government has strategically partnered with others to improve businesses’ access to capital. In January 2014, Ontario launched the Northleaf Venture Catalyst Fund in partnership with the federal government and the private sector. To date, the fund has made 14 investments in companies and venture capital funds. The fund builds upon the success of the Ontario Venture Capital Fund, which has supported 50 Ontario-based companies to date. The Province also continues to provide funding to the Investment Accelerator Fund (IAF) and the Youth IAF, which have invested in more than 110 companies.
Ontario’s investments to improve access to capital are paying off. According to Thomson Reuters, venture capital investment by all investors in Ontario-based companies was over $1.2 billion in 2015 — the most since 2001. Ontario accounted for almost half of all venture capital investment in Canada in 2015. As well, venture capital for seed and early-stage companies has been increasing in recent years. Moving forward, Ontario will work with the financial services sector, including the Toronto Financial Services Alliance, to identify ways of mobilizing private-sector capital to provide innovative, high-potential firms with the financing they need to successfully grow more rapidly and compete globally. This will include options for seed and later-stage investments, and opportunities to partner with institutional, corporate and individual investors, including pension funds.
For an accessible description of Chart 1.1, click here.
The government continues to foster a regulatory environment that accommodates newer and more innovative ways for businesses to raise capital while maintaining appropriate investor protection. The Province recently approved several new prospectus exemptions proposed by the Ontario Securities Commission that are designed to facilitate capital formation and job creation. These include a new crowdfunding exemption regime that allows businesses, particularly those in the early stages of development, to raise up to $1.5 million annually by distributing securities on a prospectus-exempt basis through a registered Internet funding portal.
Vouchers for Leading High-Growth Firms
New and emerging firms often face unique challenges in accessing the expertise and assistance they need to grow. To assist them in overcoming these challenges, the Province will create a program targeting growth-oriented firms. Modelled after the successful U.K. program that concentrated supports towards firms with the highest potential to scale into larger employers, the program will provide vouchers to leading high-growth firms to help get their products to the global marketplace. These vouchers may be used for activities such as market research, proof-of-concept testing and securing new export customers.
Government as an Early Adopter of Innovation
Firms also face barriers to growth due to the uncertainty associated with their disruptive technologies or the lack of familiarity with their brand. For this reason, the Province will create a pilot program through which the government will identify needs and purchase successful new technologies from emerging companies to support innovation. Provincial support will enhance the government’s role as an early adopter of innovations from SMEs, and give participating SMEs an opportunity to demonstrate their solutions and improve their profile in domestic and global markets. Similar programs in the United States and other advanced economies have played an important role in their innovation ecosystems. This pilot project would complement Ontario’s adoption last year of all six recommendations from the Ontario Health Innovation Council, including the establishment of a $20 million Health Technology Innovation Evaluation Fund to support made-in-Ontario technologies, improve patient care and spur economic growth.
Strategic Investments Office
To build upon the government’s strategic partnerships with the private sector, the Province will create a Strategic Investments Office to serve as a one-window point of entry to provide improved investment attraction services for major investment projects, licensing and permit coordination, facilitation of workforce training and site-selection supports. The new office will allow the government to provide a more coordinated response to the various needs of businesses. The Province will also launch an online portal to help firms easily find and navigate the programs and initiatives it provides across government.
Helping Businesses Go Global The global economy offers Ontario companies the chance to seize business opportunities by gaining market intelligence and positioning themselves for growth. Ontario’s quality agri-food, resource and high-value manufactured products, as well as environmental, business, financial and infrastructure services, continue to experience international demand. Economic opportunities for Ontario firms to capitalize on their strengths and increase their global market orientation remain strong. The timing is ripe for Ontario’s exports’ continued growth as the U.S. economy expands, emerging market economies lead global growth and the Canadian dollar remains competitive. China and India are the largest and third-largest economies in the world, respectively, after accounting for price levels (purchasing power parity), and are expected to be the fastest-growing consumer markets over the next several years. According to the International Monetary Fund (IMF), these countries will lead global economic growth in 2016–17, with gross domestic product (GDP) growth around seven per cent. By comparison, most developed economies’ GDP will grow about two per cent, on average, in this period.3
In the global knowledge-based economy, services are becoming a growing part of international trade. There are diverse needs for expertise and advice, digitization of services content and electronic online delivery contributing to this global trend. Service exports have increased significantly, by 45.2 per cent, since 2004, while Ontario’s international exports of goods are only slightly higher, by 0.2 per cent.
For an accessible description of Chart 1.2, click here.
Going Global Export Strategy
The government’s Going Global Export Strategy is helping Ontario firms, including SMEs, to start exporting, expand exports and become more productive. To this end, the government is investing an initial $30 million over the next three years to further implement the export strategy. Components of the export strategy include deploying key trade missions, a range of advisory services and programs for new and existing exporters, outreach to attract foreign buyers, and collaboration with strategic partners such as industry associations and the federal government. The government will increase Ontario’s exports by increasing the number of exporters, diversifying export markets and scaling up Ontario SME exports to create jobs. Key components of this plan include:
Driving SME exports; Scaling up programs;
Leveraging partners; and
Expanding Ontario’s global profile.
The government continues to implement its Going Global Export Strategy through various trade missions: In September 2015, Minister of Finance Charles Sousa travelled to China and Japan to meet with leaders in the financial services, banking and manufacturing sectors to promote Ontario as a favourable investment destination. China and Japan have markets with tremendous potential for Ontario businesses looking to tap into these new markets.
Premier Kathleen Wynne led a successful trade mission to California in November 2015, showcasing Ontario’s leadership in information and communications technology (ICT), film production, clean tech, advanced manufacturing and tackling climate change. In November 2015, the Premier conducted a second trade mission to China with business delegates to highlight Ontario’s expertise in the science and technology, clean tech and agriculture sectors, and to promote partnership opportunities in health care and education. Premier Wynne and delegates signed more than 100 agreements and memoranda of understanding, with an estimated total value of $2.5 billion. The agreements are expected to create 1,700 jobs in Ontario. Premier Wynne led a trade mission to India in early 2016 during which new agreements were announced between businesses and institutions from Ontario and India. These agreements, valued at over $240 million, will create 150 high-value jobs in Ontario. The government signed new memoranda of understanding with Indian states that will focus on strengthening connections in key commercial areas, including urban infrastructure, ICT, advanced manufacturing, agriculture and education. Later in 2016, a government delegation will undertake a trip to India to strengthen ties in agriculture and food processing.
The Premier will lead a business delegation to Israel in spring 2016 to build on Ontario’s existing relationships, create new partnerships and promote investment in the province.
Ontario is working with the federal government to negotiate and implement important new trade agreements, while addressing the sensitivities of key Ontario sectors, such as agriculture and auto, and ensuring access to global markets in an increasingly competitive environment. Modernizing Regulations
Ontario is also renewing its efforts to further improve the province’s competitive business environment by introducing new tools that will help reduce unclear, outdated or unnecessarily costly regulatory requirements on businesses, and accelerate the modernization of old service delivery processes. Red Tape Challenge
The Red Tape Challenge, to be launched this spring, is an online consultation tool designed to identify and eliminate duplication, lessen compliance burdens, shorten response times and make it easier for businesses to interact with the government. It will engage with the public, businesses and stakeholders in addressing regulatory challenges and identifying opportunities to reshape Ontario’s economy. The Red Tape Challenge is also part of the Province’s Open Government commitment to create a more transparent, accessible and collaborative government. The Province will work with six sectors over the next two years, starting with auto parts manufacturing and food processing, and continuing with other sectors including financial services, mining, chemical manufacturing and forestry. Regulatory Modernization Committee
The government is creating a new Regulatory Modernization Committee. It will act as an advisory body to oversee and enhance the regulatory challenge function. Centre of Excellence
A new Centre of Excellence will champion international best practices for regulatory quality, simplicity, alternatives to regulation and cost-benefit analysis. The centre will create a network of experts and strengthen Ontario’s knowledge and research base on modern regulatory practices as drivers of economic growth.
In the 2015 Ontario Economic Outlook and Fiscal Review, the government committed to enacting the following regulatory measures on an expedited basis:
Seeking advice, through the Ministry of Labour, from the Special Advisers on the Changing Workplaces Review to resolve concerns raised by business regarding the application of the emergency leave provisions of the Employment Standards Act. The advice is to be received in spring 2016, and the resolution is to be implemented later this year.
Reducing, by fall 2017, the amount of ministry time taken to review air and noise environmental compliance approvals by at least 50 per cent;
Implementing a one-year service standard for higher-risk environmental compliance approval requests received after 2017, including an appropriate performance measure for meeting that service standard that recognizes the complexities of some approvals; and
Streamlining Superload permits by amending the Highway Traffic Act to provide more options for escorts of loads, and consulting with affected parties to develop a streamlined and more efficient approval process, including exploring enhanced permitting options, a coordinated permitting service and creating Superload corridors.
Removing the “30 per cent rule” for Ontario pension plans. Through a proposed legislative amendment, modernizing the Mining Act to implement province-wide online registration of mining claims and administration of mining lands.
Permanently maintaining the industrial exception in the Professional Engineers Act, which provides flexibility to industry.
Legislation will be introduced in the spring that, if passed, will further assist with reducing administrative burdens and lowering costs for businesses.
Climate change is not a distant threat: it is already costing the people of Ontario. It has devastated communities, damaged homes, businesses and crops, and increased insurance rates. The rate of global warming over the last 50 years is almost double the rate of warming over the last 100 years. Worldwide, 14 of the last 15 years have been the warmest on record. Through Ontario’s Budget Talks website, a number of Ontarians gave their thoughts on how the government could support the transition to a low-carbon economy. Ideas ranged from support for home-energy audits to support for improved cycling infrastructure.
The effects of climate change have already had an impact on Ontario. In July 2013, a monumental rainstorm dropped 125 millimetres of rain in just a few hours over some parts of Ontario, leading to flooding and property damage estimated at $940 million in Toronto alone — the most expensive natural disaster in the province’s history. In December of that same year, a severe ice storm resulted in $200 million of property damage. In 2012, Ontario experienced a March so warm it led to early blooming of apple trees, followed by a severe frost in May that caused the loss of 80 per cent of the apple crop.
The effects on infrastructure are equally apparent and costly: roads that buckle in severe heat, water mains that overflow in severe rain, hydro lines coated with heavy ice that snap and leave tens of thousands of Ontario families and businesses without power.
In short, there is growing consensus that climate change, if left unchecked, will create significant economic damage, as well as negative environmental impacts. According to the Organisation for Economic Co-operation and Development (OECD), global annual GDP will suffer 1.0 to 3.3 per cent by 2060 if no further climate actions are taken.4 Early and ambitious actions can prevent half of that damage.
The costs of doing nothing to tackle climate change are clear, and so are the benefits of acting. Taking action to reduce greenhouse gas (GHG) emissions means cleaner air, less time spent in traffic, more comfortable homes and offices, and more convenient, livable cities. Continuing to transition to a low-carbon economy also means more efficient and productive businesses. Ontario can harness the economic potential of the rapidly growing global clean technology industry. The clean technology industry in Canada is currently worth $12 billion, and directly employs 50,000 people. If it were to grow comparable to Canada’s overall share of global trade, it would be worth $50 billion in 2022. In late 2015, in Paris, global leaders pledged to take serious action to reduce GHG emissions, which will further accelerate the growth of the clean tech industry worldwide. Ontario is already on a path to a low-carbon economy. The elimination of coal-fired electricity and investment in clean, renewable energy has allowed the Province to meet its goal to reduce GHG emissions in 2014 and to make it the Canadian leader in clean tech. The Toronto Stock Exchange (TSX) and TSX Venture Exchange list 116 clean technology companies, valued at $27 billion. Ontario’s clean water technologies sector attracts innovative businesses due to its key advantages, including world-class research institutes, supportive government programs, generous R&D tax credits, a highly educated labour force and a streamlined commercialization process.
By protecting the environment today, the government is positioning Ontario as an active player in future sustainable economic growth and job creation. This approach recognizes that the global fight against climate change presents new types of economic opportunities where Ontario can lead. Cap-and-Trade Program
In November 2015, Ontario released its Climate Change Strategy and is currently developing an action plan to deliver on that strategy. A key component of that action plan is to implement a cap-and-trade program on GHG emissions with its Western Climate Initiative (WCI) partners, California and Quebec. To facilitate the implementation of a well-designed cap-and-trade program, the government is introducing legislation that, if passed, will set out upcoming emissions reduction targets for Ontario, require the publication of a climate change action plan, and impose criteria and rules for governing the cap-and-trade carbon market and for the use of proceeds that the new system generates. See Chapter III, Section B: Fiscal Outlook for details regarding cap-and-trade proceeds.
TABLE 1.1 Dispelling Myths about Cap and Trade Myth
We do not need cap and trade to fight climate change.
There is broad consensus that carbon pricing is the best tool for reducing greenhouse gas emissions and driving a prosperous low-carbon, high-productivity economy.
Following Ontario’s introduction of a cap-and-trade system, more than 75 per cent of Canadians would live in a province with some form of carbon pricing.
Cap and trade will lead to job losses and harm the economy.
Addressing climate change now allows Ontario to take advantage of the enormous economic opportunities that have emerged for clean technologies. Ontario is a leader in environmental and clean tech sectors; for the second consecutive year, the province is the leading jurisdiction in North America for green investment.
Economic growth has continued in other North American jurisdictions that have implemented cap and trade.
The government needs cap and trade to balance the books.
Legislation would require all cap-and-trade proceeds to be invested in key green initiatives that lower greenhouse gas emissions.
The path to a balanced budget is premised on growing the economy, transforming and modernizing government and managing costs, as well as addressing the underground economy and maintaining tax fairness.
Ontario’s cap-and-trade program would cover industries, institutions, electricity generators, and suppliers and distributors of heating fuels that emit 25,000 tonnes of GHG emissions per year or more, as well as suppliers and distributors of transportation fuels that distribute 200 litres of fuel per year or more. The program would also cover entities that import electricity and fuels into Ontario. With this broad, economy-wide approach, 82 per cent of the province’s total GHG emissions would be covered under the program. For an accessible description of Chart 1.3, click here.
The Province would set a cap on emissions for each year of the first compliance period that will start in 2017 and last through 2020; the cap would be set based on the emissions that are forecast for each of those four years. The cap would translate into the total number of emissions allowances — where one allowance covers one tonne of GHG emissions — that would be made available for the covered sectors through auctioning and free-of-charge allocation. Carbon emitters in sectors covered under the program would be required to hold a sufficient number of allowances to cover their annual emissions.
Between 2017 and 2020, the economy-wide cap is expected to decline at a rate of 4.17 per cent each year to meet Ontario’s 2020 emissions-reduction target. This means there would be fewer allowances made available each year to incentivize carbon emitters in covered sectors to reduce emissions. The heating and transportation fuel sector and industries would face cap declines. However, the sector-specific cap for the electricity generation sector would remain unchanged from year to year. This recognizes the significant emissions reduction that the sector has already undertaken with the closure of coal-fired power plants.
Ontario’s leadership will extend to working together with the growing number of like-minded jurisdictions that are pricing carbon in their economies, including other provinces and U.S. states. However, the government recognizes that in the short term there may be a risk for industries that have high emissions and face international competition. To help maintain competitiveness, Ontario would allocate emissions allowances free of charge to a broad range of industries such as cement, lime and steel, as a transitional measure. Under established cap-and-trade programs in California and Quebec, free-of-charge allowances have been effective at reducing the risk of “carbon leakage,” or the relocation of local industries to other jurisdictions with lax environmental standards or no carbon pricing policy. Ontario will review the allocation of allowances at the end of the first compliance period, in 2020.
The coverage of electricity and fuel imports in the program would provide a level playing field for Ontario’s electricity generation and fuels sectors. The government would also consider additional actions to prevent carbon leakage, including border carbon adjustments, and would consult and seek to collaborate with the federal government on such potential measures. To facilitate compliance, covered sectors would also have the option of funding emissions reductions in non-covered sectors, such as agriculture, through the purchase of offset credits. The government would establish the criteria for creating offset credits that are real, permanent and quantifiable. Furthermore, emitters that have voluntarily taken early and verifiable action to reduce GHG emissions would be rewarded through one-time early reduction credits. Smaller emitters with annual emissions of between 10,000 and 25,000 tonnes would have the choice of opting into the cap-and-trade program and access to free allocation of allowances. Cap-and-Trade Green Investments
The auctioning of allowances under the cap-and-trade program would generate proceeds that would provide essential support towards achieving Ontario’s emissions reduction and economic objectives, in particular because all proceeds would be used to fund emissions-reduction initiatives. This would help Ontario meet its 2020 and 2030 emissions-reduction targets and establish the foundation for low-carbon prosperity for households and businesses. Accordingly, cap-and-trade legislation, if passed, would dedicate cap-and-trade proceeds to the reduction of GHG emissions and ensure public reporting on that commitment.
Ontario’s approach to the investment of cap-and-trade proceeds would be both balanced and strategic, focusing on initiatives where the opportunity for emissions reduction and sustainable economic growth is greatest. Potential investments could include assistance for Ontarians and businesses to reduce their energy uses and costs such as:
Production and use of renewable, low-carbon, carbon-free and net-zero alternative energy; Energy management technologies to support load-shifting and energy storage;
Geothermal solutions, insulation and other technologies to eliminate or reduce GHG emissions from buildings and neighbourhoods; Infrastructure to support adoption and use of zero-emission and plug-in hybrid vehicles, and low-carbon alternative fuels;
Active transportation infrastructure that will eliminate or reduce GHG emissions; Emissions reductions from the transportation sector through measures such as investments in public transit and transportation infrastructure;
Initiatives relating to the reduction of GHG emissions from industry; Support for practices in agriculture, soil, and forestry and natural systems that reduce emissions; Reduction and management of waste that produces GHG emissions; and Support for organizations that develop and deliver financing tools, project aggregation and professional services for GHG emissions-reduction initiatives.
The government is currently developing specific emissions-reduction initiatives that will be laid out in the upcoming Climate Action Plan. As part of the action plan, the Province will look for ways to use government procurement to support the transition to a low-carbon economy in government operations. Independent economic analysis demonstrates that a targeted and balanced approach to investing proceeds will mitigate the risk of carbon leakage, help stimulate Ontario’s economy and create jobs. To be part of a low-carbon and competitive economy, it is important for Ontario’s sectors to reduce their reliance on fossil fuels. The Province’s strategic investments of cap-and-trade proceeds would help sectors achieve this goal by increasing productivity and efficiency, making them more competitive. The Province would work with business to encourage the uptake of lower carbon technologies by providing timely regulatory review and approval of proposals that could help GHG emissions, such as the use of alternative fuels for the production of cement.
Cap and Trade — Cost to Energy Consumers
The government’s action plan to fight climate change will include initiatives that help Ontarians in their everyday lives. These initiatives will both help mitigate the direct price increases that are anticipated as a result of cap and trade, and provide a range of options for households to reduce GHG emissions. TABLE 1.2 Cap and Trade — Cost to Energy Consumers Electricity Costs1 - Commercial and Industrial
Electricity Costs1 - Residential
Transportation - Gasoline Prices
+ 4.3 cents/litre
Home Heating - Natural Gas Prices
+ 3.3 cents/cubic metre
Home Heating - Natural Gas Costs1
1 Based on average cost per household or facility.
Sources: Ontario Ministry of Energy, Ontario Ministry of the Environment and Climate Change, and Ontario Ministry of Finance.
Based on the current forecast for the price of carbon, the pump price of a litre of gasoline would increase 4.3 cents and the cost of a cubic metre of natural gas would rise by 3.3 cents as a result of cap and trade. These price increases are very small compared to the larger decreases that have occurred as a result of lower global prices for oil and natural gas. Ontario gasoline pump prices in January 2016 were, on average, 34.4 cents per litre lower than in 2014. Likewise, average natural gas prices in Ontario in January 2016 were 7.7 cents per cubic metre below where they had been in 2014. The government will also take steps to ensure that the net impact of cap and trade would not result in an overall increase in electricity costs for commercial and industrial consumers, and that there would be a modest benefit of up to $2 per month, on average, to residential consumers. The Province currently provides a wide range of incentives that households can use to reduce their energy consumption and lower their costs. For example, the recently announced cash rebate of up to $14,000 for the purchase of an electric vehicle or plug-in hybrid electric vehicle could save a household up to $1,400 per year in gasoline costs. Building on existing programs to support home energy efficiency (see box below), the Ontario Energy Board recently approved annual budgets and demand side management (DSM) programs. A typical residential customer who participates in the new DSM programs could save up to $11 per month. Future programs supported by cap-and-trade proceeds are expected to result in substantially larger savings to households. Examples of Programs Supporting Home Energy Efficiency
Enbridge Gas Distribution (Enbridge) and Union Gas currently offer a variety of programs and incentives, funded through natural gas rates, to help homeowners reduce their natural gas consumption, including:
Home Audit and Retrofit programs that provide homeowners with incentives to make energy efficiency upgrades. Under the programs, homeowners can receive incentive levels that typically range between $1,000 and $2,500 for energy audits and retrofits such as furnace and water heating systems replacement and insulation.
Home Winterproofing and Weatherization programs that provide eligible low-income households with a free home assessment, water conservation measures, programmable thermostat and weatherization services (e.g., insulation and air sealing).
Adaptive Thermostat program for Enbridge customers that offers participants a $75 incentive for the installation of an adaptive thermostat.
As outlined below, the government will be investing $100 million from the Green Investment Fund to help homeowners reduce their energy bills and reduce GHG emissions. The conclusion that a cap-and-trade program is beneficial to households is supported by the experience of the Regional Greenhouse Gas Initiative (RGGI), a cap-and-trade program for greenhouse gas emissions from power plants in the northeastern United States.5 Research commissioned by RGGI concludes that “in the end, consumers gain because their overall electricity bills go down as a result of state RGGI allowance revenue investments, primarily in energy efficiency but also renewable energy-focused programs.”6 Green Investment Fund
The Province has already taken important steps towards investing cap-and-trade proceeds in ways that support its environmental and economic objectives. In the 2015 Ontario Economic Outlook and Fiscal Review, the Province announced that it will invest $325 million in 2015–16 through a new Green Investment Fund, which is a down payment on the province’s cap-and-trade program. The deployment of these funds is already underway. In December 2015, the Province announced that $20 million from the Green Investment Fund will be used to begin building a network of fast-charging electric vehicle public charging stations in cities, along highways and at workplaces, apartments, condominiums, and public places.
More recently, in February 2016, the government announced that it is investing $100 million to help homeowners reduce their energy bills and cut GHG emissions. In partnership with Enbridge Gas Distribution and Union Gas, the program will help about 37,000 homeowners conduct audits to identify energy-saving opportunities and then take actions, such as replacing furnaces or water heaters and upgrading insulation. This will also help spur innovation and create jobs in clean energy industries.
Additionally, the government is investing $26 million to support energy-efficiency initiatives for SMEs, $74 million for new technology innovation initiatives for large industrial emitters, and a further $92 million in social housing energy retrofit initiatives. The government is also investing $5 million to support climate change adaptation and mitigation activities in First Nation communities. The Province is also investing $8 million for microgrids in remote First Nation communities to replace the use of diesel fuel with alternatives.
TABLE 1.3 Detailed Breakdown of Supports through Green Investment Fund
Business - Energy-efficiency/emissions-reduction support for small and medium-sized manufacturers
Business - Energy-efficiency investments in small businesses
Business - Technology innovation initiatives for large industrial emitters
Residential - Social housing electricity efficiency program
Residential - Social housing retrofit program
Residential - Audits and energy-efficiency retrofits for single family homes
First Nations - Support for climate change adaptation and mitigation activities for First Nation communities
First Nations - Development of renewable power and energy storage to reduce costly and emission-intensive diesel fuel use in First Nation communities
Electric Vehicles - Electric vehicle public charging infrastructure
In addition to the Green Investment Fund, the Province will provide a new $17 million endowment to support the Toronto Atmospheric Fund (TAF). The TAF is a non-profit corporation, created in 1991, with a $23 million financial endowment from the City of Toronto. Its mandate is to innovate, promote and invest in opportunities to reduce GHG emissions and improve air quality in Toronto.
The corporation has reported cost savings of over $60 million in the last 25 years through energy conservation, by investing nearly three times the original endowment, and mobilizing $160 million in public and private contributions to low-carbon solutions. Ontario’s new endowment will enable TAF to expand its work to the broader GTHA to help the Province achieve its climate goals by working on innovative solutions across the region.
Taken together, these investments reflect the Province’s commitment to devote the financial resources necessary to secure a low-carbon future by transforming the way Ontarians live, move, work and adapt to the environment, while ensuring strong, sustainable communities. Green Bonds
Ontario has developed a robust green bond framework that aligns with its environmental policies and climate objectives. There are five categories in the framework: Clean transportation;
Clean energy and technology; Forestry, agriculture and land management; and Climate adaptation and resilience. On January 22, 2016, Ontario successfully launched its second Green Bond of $750 million. The issue was also made available to retail investors through Canadian financial institutions. Proceeds from the bond will help fund environmentally friendly infrastructure projects that improve transit, education and health care across the province. To date, total Green Bond financing amounts to $1.25 billion. As the first Canadian province to issue Green Bonds, Ontario is leading the way in establishing and developing a Canadian-dollar Green Bond market with global investor participation. Strategic Partnerships	Jobs and Prosperity Fund
The $2.7 billion Jobs and Prosperity Fund (JPF) allows the government to partner with businesses to enhance productivity, innovation and exports in the Ontario economy. Project commitments by the JPF to date will support the creation and retention of more than 16,000 jobs, attracting investment of over $1 billion. TABLE 1.4 Recent Strategic Investments through the Jobs and Prosperity Fund
Linamar (January 2015)
An investment of over $50 million to leverage a total investment of over $500 million by Linamar. The investment will enable the company to develop and produce components for the next generation of fuel-efficient cars in Guelph, while creating 1,200 jobs and retaining more than 6,800 jobs.
JLABS @ Toronto (September 2015) An investment of over $19 million to launch JLABS @ Toronto, a new life sciences incubator created as a collaboration between Johnson & Johnson, the University of Toronto, and MaRS Discovery District. The incubator will support the growth of up to 50 promising young life sciences companies.
An investment of $5 million to leverage a total investment of $40 million by P&H Milling Group. The project will build a new flour mill in Hamilton, along with investments in state-of-the-art grain and flour storage equipment. The project will create 16 jobs while retaining 200 jobs.
IBM Canada — Ontario Centres
of Excellence Project
An investment of over $22 million to leverage a total investment of almost $55 million by the Ontario Centres of Excellence and IBM Canada. The investment will provide up to 500 Ontario startups and other early-stage companies with access to technologies, working space and expertise.
Creating New Business Opportunities through Strategic Partnerships
The Province’s success in creating new business opportunities is exemplified in the following quotation from Dr. Paul Stoffels, Chief Scientific Officer and Worldwide Chairman, Pharmaceuticals, Johnson & Johnson:
“We are pleased to be collaborating with the Ontario government on this exciting initiative to support scientists and entrepreneurs who are working on new frontiers in science and medicine to transform health care. With a Johnson & Johnson Innovation, [the] JLABS site in Toronto, we deepen our relationship with the region’s world-class health care and life sciences community and support startup companies that will produce new treatments and new economic opportunities.” Supporting Agriculture, Regional Communities and Partnerships
Investing in regional economic development is a vital part of the government’s plan to build Ontario up and create a dynamic innovative environment where private businesses thrive. Ontario’s regional and community development funds can help local firms transform into innovative, productivity-focused, export-oriented businesses.
Regional and community development funds include the:
Northern Ontario Heritage Fund Corporation (NOHFC);
Rural Economic Development (RED) program; and Aboriginal Economic Development Fund (AEDF).
TABLE 1.5 Recent Regional Development Investments
Hammond Manufacturing (SWODF)
Hammond Manufacturing Company, a Guelph manufacturer of a broad range of products for the electronic and electrical products industry, received $1.5 million over six years to upgrade its manufacturing process and make it more environmentally friendly. This investment will help create 55 new jobs, increase exports and leverage more than $15 million in private investment. 3M Canada (EODF)
3M Canada, located in Brockville, received a $549,000 grant to develop and commercialize a new disruptive carbon-filled cartridge technology to manufacture products for global application in health care, highway safety, office products and optical films. This support will help create 10 new highly skilled jobs. Wahgoshig First Nation (AEDF)
The Wahgoshig First Nation received $247,341 for a training initiative delivered in partnership with Northern College and Primero Mining Corporation. Twelve students will receive training to obtain the skills necessary to work in the mining industry.
(NOHFC)
Envirotek Sealing and Fiberglassing Inc., located in Sault Ste. Marie, has received a $1 million grant for a $2 million facility expansion for its line of HVAC products and custom design metal products. This project is creating seven new jobs. The Province remains committed to supporting Ontario’s agricultural sector and fostering its growth through its continued support for Business Risk Management programs. Ontario’s Risk Management Program helps producers manage risks beyond their control, such as fluctuating costs and market prices.
The government is committed to lowering the costs of doing business by maintaining a competitive tax system and reducing electricity costs for business. Potential reductions in workplace safety insurance premiums would further lower business costs.
Maintaining a Competitive Tax Environment
The government’s recent business tax reforms have cut taxes and lowered compliance costs to improve Ontario’s tax competitiveness and encourage investment and job creation, including:
Sales tax harmonization and corporate tax cuts totalling about $9.6 billion per year:
The Harmonized Sales Tax (HST) will remove $4.8 billion a year in embedded sales taxes paid by businesses; Cuts to Corporate Income Tax (CIT) rates for businesses are providing $2.5 billion of tax relief per year; and
Elimination of the Capital Tax, which corporations paid whether or not they had a profit, is providing $2.3 billion of tax relief per year.
Significant cuts to high Business Education Tax rates, resulting in ongoing savings of over $200 million per year for Ontario businesses. An accelerated depreciation rate for manufacturing and processing machinery and equipment from 2016 to the end of 2025, paralleling the federal budget measure. This provides a benefit of approximately $330 million from 2016–17 to 2019–20.
Greater tax relief to small employers by increasing the Employer Health Tax (EHT) exemption threshold from $400,000 to $450,000 of annual payroll, beginning in 2014. This increase provides additional EHT relief of up to $975 per eligible employer. Ontario’s general CIT rate was reduced in stages from 14 per cent to 11.5 per cent, making it the second lowest in Canada. For an accessible description of Chart 1.4, click here.
Ontario’s combined federal–provincial general CIT rate of 26.5 per cent is lower than the comparable rate in any of the U.S. states. In addition, Ontario’s combined rate is lower than the average CIT rate of G7 and G20 member countries. For an accessible description of Chart 1.5, click here.
The decrease in the general CIT rate, along with other tax reductions, has cut Ontario’s marginal effective tax rate on new business investment in half since 2009, making the province a significantly more attractive location for business investment.
For an accessible description of Chart 1.6, click here.
Reducing Electricity Costs for Business
The government modernized Ontario’s electricity system to ensure businesses have the power they need, when they need it. Prudent management of the electricity sector debt has allowed the government to follow through on its commitment to reduce electricity cost pressures for businesses and industrial users, introducing legislation to end the debt retirement charge (DRC) as of April 1, 2018. This is nine months earlier than previously estimated, providing certainty to commercial, industrial and other users, and helping them more effectively plan their business and investment decisions.
Electricity Cost Savings to Business from Ending the Debt Retirement Charge
A large industrial using 3,000 megawatt-hours (MWh) per month could save $21,000 per month, or about seven per cent off their electricity bills.
For a large northern industrial in the Northern Industrial Electricity Rate Program, this could be more than an eight per cent savings.
A small business using 20,000 kilowatt-hours (kWh) per month could save $140 per month, or about four per cent. Industrial Electricity Incentive Program
In 2015, the government expanded the Industrial Electricity Incentive (IEI) program with contracts up to the end of 2024 for 14 industrial companies, helping these large businesses manage their electricity costs and assisting them in creating hundreds of new jobs. This is achieved through electricity-based price adjustments for eligible electricity consumption.
Supporting Business Expansion through the Industrial Electricity Incentive Program
Detour Gold saved $20 million in 2014 while expanding its gold mine northeast of Cochrane, which, when completed, will be one of the largest gold mines in Canada.
ASW Steel Inc. expanded its specialty steel-making facility in Welland and created 45 new jobs.
“Through the IEI program, ASW welcomes access to competitively priced power for eligible electricity consumed as a result of our expansion in Welland, creating good jobs and wealth for Ontarians.”
Atlantic Packaging updated its Whitby mill to manufacture 100 per cent recycled paper products, and create 80 new jobs.
“Atlantic competes in a North American and sometimes global marketplace. Our IEI contract reduced risk in the investment required at our Whitby facility that allowed for the creation of jobs and helps the facility be more competitive with other jurisdictions in North America.”
Industrial Conservation Initiative The government expanded the Industrial Conservation Initiative (ICI), encouraging more of Ontario’s largest energy users to reduce their electricity use during peak periods. Doing so not only saves them money, but also lowers overall costs and improves reliability for the electricity system as a whole. Since July 1, 2015, the expanded ICI program has helped more than 280 of Ontario’s largest energy consumers save an average of about 25 per cent on their electricity bills.
The Industrial Accelerator Program (IAP) has been extended for an additional five-year period from 2015 to 2020. The IAP is designed to assist eligible transmission-connected companies to fast-track capital investments in major energy conservation projects. The IAP provides financial incentives to encourage investment in innovative process improvements and equipment retrofits to reduce electricity consumption and help companies become more competitive.
Promoting Conservation and Cost Savings through the Industrial Accelerator Program
The Industrial Accelerator Program helped ArcelorMittal Dofasco’s (AMD) Hamilton steel plant minimize capital investment in many energy-efficiency projects at the facility, while saving millions of dollars on electricity costs. A long-time participant in the Industrial Accelerator Program, AMD has committed to 125 GWh in recurring annual energy savings and reduced electricity costs by more than $10 million annually. Currently, AMD is developing projects to create an additional 33 MW of demand savings by 2020. The projects include installation of high-efficiency compressors, variable frequency drives and a new turbine generator using excess by-product fuels.
There are additional programs and incentives available to help industrial consumers manage their energy costs, such as demand response programs, which are administered by the Independent Electricity System Operator.
Future reductions in Workplace Safety and Insurance Board (WSIB) premiums would significantly lower business costs in Ontario.
In 2009, the Auditor General warned that the WSIB’s costs had begun to significantly outstrip its revenues, putting at risk the WSIB’s capacity to meet its obligations to injured workers. Following a funding review, legislation was passed in 2012 requiring the WSIB to eliminate its unfunded liability by 2027, with interim funding targets in 2017 and 2022. The WSIB has taken significant steps to reduce costs, and its finances have been improved by growth in investment returns and insurable payrolls. After hitting a high of $14.2 billion in 2011, the unfunded liability was $6.8 billion as of the WSIB’s 2015 third quarter that ended September 30, 2015. At the end of its 2015 third quarter, WSIB was close to 78 per cent funded on a sufficiency basis, approaching the 2022 requirement of 80 per cent. The WSIB is now projecting the possibility of reaching full funding by 2022 — five years ahead of the legislated timeline.
A more solid financial footing for the WSIB protects worker benefits and supports employers. Due to progress made to date, employer premiums have not been increased for three years. In its “2015 Economic Statement,” the WSIB estimated that when the unfunded liability component is removed from the premium rate, it will be able to deliver $2.4 billion annually in premium reductions. This would represent an average premium rate reduction of about 40 per cent, with the average premium rate declining from $2.46 per $100 of payroll to $1.40 to $1.50 in 2015 dollars. It would also make Ontario one of the most competitive provinces in terms of workplace insurance costs, while it remains the province with the lowest allowed lost-time injury rates. TABLE 1.6 Opportunity for WSIB Rate Reductions1
Average Premium Rate2
Resulting Annual Savings3
Sufficiency Ratio
$2.12 by 2022
$1.75 by 2027
1 Subject to the assumptions underlying the long-term funding targets presented in the WSIB’s “2015 Economic Statement.”
2 In 2015 dollars per hundred dollars of payroll.
3 By the final year in the time period, in 2015 dollars (dollar value of savings will grow with the economy).
Note: The WSIB is an independent trust agency that is responsible for administering compensation and no-fault insurance for Ontario workplaces. The WSIB’s Board of Directors has exclusive authority in setting premium rates.
Source: WSIB, “2015 Economic Statement,” (November 2015).
The Province continues to modernize policies to reduce regulatory barriers for Ontario’s beverage alcohol manufacturing industry. This includes:
Reducing the administrative burden on businesses involved in liquor manufacturing and distribution;
Allowing the sale of certain non-liquor products, such as artisanal foods, at manufacturers’ on-site retail stores, which will enhance the cultural and culinary experience at these stores; and
Removing local grape content requirements for wineries located outside Ontario’s three designated viticultural areas to level the playing field for all wine manufacturers in Ontario.
In addition, the government will support Ontario’s growing craft spirits industry by allowing direct delivery to bars and restaurants, and for on-site distillery stores, reducing charges and allowing an exemption for promotional distribution. To encourage the continued success of Ontario’s growing craft cider industry, the government will introduce the sale of cider alongside beer in grocery stores and permit Ontario craft cider to be sold at farmers’ markets.
The government will continue to support Ontario’s dynamic craft beer industry by extending funding for the Ontario Microbrewery Strategy. This strategy will provide $1.4 million over two years in marketing support to complement the brewers’ successful launch in grocery stores.
These changes support new investment and innovation, while ensuring the continued responsible sale of alcohol.
Ontario Lottery and Gaming Corporation (OLG) modernization is designed to maintain and grow the gaming industry in a socially responsible manner. Ontario’s gaming industry employs thousands of Ontarians and contributes to local economic development across the province. Modernizing the OLG will enhance the funding available to pay for important public services such as health care and education by broadening the role of the private sector in OLG day-to-day lottery and gaming site operations and encouraging capital investments and job creation. The OLG recently hired a private operator to run two gaming sites in eastern Ontario and develop a new gaming site in Belleville. It is estimated that this new site will create more than 300 jobs in the Belleville community. For 2016, additional large-scale procurements are underway for the Greater Toronto Area, northern and southwestern Ontario gaming sites, as well as for OLG’s lottery business.
Technological advances continue to drive changes in OLG customer preferences and product offerings, which in turn will drive government policy considerations in the near future related to provincial delivery of charitable bingo games and new commercial gaming products. The OLG Internet offering, PlayOLG.ca, recently celebrated the one-year anniversary of its launch. However, there continues to be ongoing grey-market competition. Ontario will continue to work and consult with other provinces and the federal government in 2016 to determine how best to meet market demand and encourage responsible gambling.
The OLG also continues to integrate horse racing into its gaming strategy. In fiscal 2016–17, OLG will begin to fund the horse racing industry through a provincial transfer payment program, formerly the Horse Racing Partnership Funding Program, while continuing to provide marketing and responsible gambling support to the industry. The program will now be extended for two additional years, beyond March 2019, to March 2021. This extension will give confidence to the industry to make investments and business decisions for the coming years. It will also contribute to the continued support of rural jobs and economic development in the agricultural sector, particularly as they relate to the horse breeding sector. Beyond this time, the intention would be for OLG to establish a future, longer-term funding arrangement with the industry. The arrangement would be subject to government approvals, and further integrate gaming with horse racing to support industry sustainability. Supporting the Sharing Economy
The sharing economy has significant potential to drive economic growth, productivity and innovation. Sharing economy platforms grow more quickly than traditional businesses due to the rapidly evolving technology that typically enables them. According to an estimate by PricewaterhouseCoopers, revenues from five of the key sharing economy sectors (accommodation, transportation, finance, services and labour, and music/video streaming) are projected to grow from $15 billion US today to $335 billion US by 2025.7 Moreover, research by the University of California, Berkley, and the Wharton School of the University of Pennsylvania concludes that the benefits of the sharing economy extend to cost savings for consumers, flexible employment opportunities, greater supply and choice of services across sectors, and increased access to capital for small startups.8
For an accessible description of Chart 1.7, click here.
Adapting Ontario’s economy to accommodate new business models requires careful consideration and consultations with key stakeholders, including municipalities, the public, industry and other interested parties, to ensure rules and regulations reflect an appropriate balance between the four principles guiding the Province’s strategy. In the coming months, the Province will launch a more targeted consultation to help determine the best approach for Ontario moving forward, including exploring ways to further enable home-sharing and allow greater flexibility for ride-sharing. Ontario will also explore sharing economy platforms and other new business models, to understand whether they could enhance the way the government does business.
Based on early analysis, there are a number of key challenges that must be addressed. That is why Ontario is moving forward with early action by: Ensuring that the Province’s auto insurance system can help provide peace of mind to those offering and using new types of transportation services through the sharing economy;
Auto Insurance in the Sharing Economy
The sharing economy is changing the way transportation services are provided in Ontario. Ontario’s competitive market for auto insurance is beginning to respond and adapt to the sharing economy. Insurance companies are competing to develop new and innovative insurance products that provide for ride-sharing services.
The Financial Services Commission of Ontario (FSCO) has received filings from different companies proposing new auto insurance products tailored to the sharing economy. In January, FSCO approved an insurance product allowing individual drivers to purchase coverage for ride-sharing activity in Ontario.
Other insurance product proposals are currently being reviewed by FSCO to assess how they can work within Ontario’s existing regulatory framework. While this review work is proceeding, the reality is that there continues to be a significant insurance coverage gap for thousands of Ontarians driving and using ride-sharing services every day.
The protection of these Ontario drivers and consumers is a critical government public policy objective and FSCO is aware of the importance to the government of achieving this objective as quickly as possible.
Towards that end, the government and FSCO are exploring how Ontario’s flexible insurance regulatory system can quickly approve new insurance products, which could include the possibility of interim approvals. Using such flexible responses would allow new products to be introduced in the market while the government, working with the regulator and the insurance industry, develops over the coming months, the legislative and regulatory changes necessary to fully integrate the sharing economy into Ontario’s auto insurance system. This flexible response to auto insurance issues created by sharing economy business models will protect drivers and consumers with the coverage they need. It will also help foster innovation by allowing companies offering different types of transportation services to operate in Ontario with proper insurance coverage. It will also help promote a more level playing field by initiating a comprehensive review to identify changes required to modernize Ontario’s legislative and regulatory framework for auto insurance to better serve all stakeholders in the system. Commencing consultation with industry and communities in spring 2016 on options to facilitate new and innovative choices for intercity passenger travel. The government will consult on a new regulatory regime to ensure safe and sustainable intercity passenger travel services; and
Piloting a program with Airbnb, a key sharing economy platform, to educate Ontarians who engage in home-sharing about their consumer rights and responsibilities, and raise awareness of tax obligations. Promoting Social Enterprises
In Ontario, the social enterprise sector contributes to economic and social development by creating jobs, increasing entrepreneurship and addressing society’s most pressing social and environmental issues. It also helps and empowers the province’s most vulnerable people.
On average, each social enterprise employs 38 people and generates $1.2 million in revenue. There are an estimated 10,000 social enterprises in the province. The government continues to invest in programs that support social entrepreneurs and the growth of social enterprises. In 2013, the government launched the three-year, $25 million Social Enterprise Strategy to position Ontario as a leading jurisdiction to start, grow and invest in social enterprises. Ontario’s $4 million Social Enterprise Demonstration Fund supports innovative social finance pilot projects across the province. The initiative created over 50 jobs during its first six months. Through the Ontario Catapult Microloan Fund, Ontario social enterprises may qualify for a loan of up to $25,000, as well as support services such as business mentorship. In June 2015, a $4 million Community Loans Fund was launched to provide low-interest commercial loans to businesses that commit to hiring people with disabilities. It is expected that up to 1,100 jobs will be created through 550 loans. Launched in May 2015, the Ontario Social Impact Vouchers Pilot Program provides vouchers worth up to $3,000 to eligible social entrepreneurs to access training specific to their needs. Currently, 125 vouchers have been issued. The government is dedicated to developing new and innovative social finance tools, including committing to pilot one or more Social Impact Bonds (SIBs) in the province. TABLE 1.7 Recent Social Enterprise Support through the Social Enterprise Demonstration Fund
Community Foundations of Canada (CFC),
Community Foundations of Canada’s Fund is an innovative social finance approach that brings together partners from the philanthropic, government and private sectors to support social enterprises across the province. Community of Foundations of Canada’s capital will be focused on social enterprises that create jobs, especially for young people. Community of Foundations Canada’s objective is to build pathways to career success for young people facing disadvantages and barriers.
The project helps provide debt and equity financing, as well as grant capital, to up to 15 early-stage social enterprises identified through the community foundation network.
PARO Centre for Women’s Enterprise,
Social Enterprise for Northern Ontario (SENO) CoStarter for Change supports the development of early-stage, high-growth social enterprises in northern Ontario by offering social entrepreneurs access to capital, educational and support programs, workspace, and other services to help launch and grow their not-for-profit and for-profit ventures. Led by PARO (“I am ready” in Latin), the SENO CoStarter for Change project aims to be a dynamic collaboration that includes representatives from organizations, First Nations, communities and businesses committed to igniting innovation, securing investment, providing education for and financing social enterprises and social entrepreneurship. The project will bring together intermediary organizations to support the development of early-stage, high-growth social enterprises.
Ontario is developing a renewed Social Enterprise Strategy for the province. The strategy will lead to the development of sustainable and scalable social enterprises, and will continue to position Ontario as a leading jurisdiction for social enterprises.
The financial services sector is critical to Ontario’s economic prosperity. In 2015, it accounted for 390,000 jobs across the province, generating almost 10 per cent of Ontario’s GDP. The sector helps finance new investment and economic activity across other sectors of Ontario’s economy. In 2016, the government is continuing to support the growth of the financial services sector by: Advancing a modern and flexible approach to regulation; Strengthening consumer and investor protection; and
Promoting Toronto as a global financial hub.
Progress on the Establishment of the Cooperative Capital Markets Regulatory System
The government is playing a leadership role towards the establishment of the Cooperative Capital Markets Regulatory System (CCMR). The CCMR, once implemented, would enhance Canada’s stature and competitiveness in global capital markets, which would in turn promote economic activity in all provinces and territories. The CCMR would also lead to more effective regulation and enforcement through a stronger and more competitive regulatory structure that would help grow business investment. Going forward, the government plans to introduce the Capital Markets Act and related CCMR legislation, following work with other participating jurisdictions to finalize the proposed CCMR legislative framework.
Modernizing Capital Markets Regulation
The government plans to propose changes to update securities laws and continue to strengthen the financial services sector, protecting consumers and investors and bolstering the stability and efficiency of financial markets. These changes would:
Strengthen enforcement provisions; Create additional tools to provide protection for whistleblowers; and
Update the Securities Act related to the use of information obtained in investigations to allow such information to be used in a broader array of proceedings under the Securities Act.
Review of the Credit Unions and Caisses Populaires Act, 1994
“…Credit unions play a vital part in Ontario’s economy, often being the only financial services institution in smaller communities, and align with the government’s vision to invest in people and support a dynamic business climate in the province. Credit unions strengthen the health of our economy, in particular small and community-based businesses, by financing innovation and growth…. Our goal is to improve the financial well-being of families, local businesses and community organizations in the areas that we serve.”
Alterna Savings and Credit Union Ltd., pre-Budget presentation to the Standing Committee on Finance and Economic Affairs, January 22, 2016. There are 110 credit unions and caisses populaires across Ontario that serve almost 1.6 million members and employ approximately 6,800 staff.
In November 2015, Parliamentary Assistant Laura Albanese submitted her report to the Minister of Finance on the review of the Credit Unions and Caisses Populaires Act, 1994 (CUCPA). The report contains recommendations that were based on extensive consultations. They aim to ensure that the legislative framework continues to protect consumers, is aligned with international best practices and enables credit unions to meet the evolving needs of their members. Ms. Albanese’s recommendations include:
Setting the deposit insurance coverage limit at $250,000, including $250,000 coverage for deposits held in each type of registered account (such as Registered Retirement Savings Plans or Tax-Free Savings Accounts).
Harmonizing subsidiary ownership rules with those in place for banks and permitting credit unions to wholly own insurance brokerage subsidiaries.
Working with relevant ministries to remove legislative barriers that impede the ability of credit unions to do business with municipalities, universities, school boards and hospitals (“the MUSH sector”) and other sectors. This includes considering changes to the investment rules for municipalities, as well as leading an initiative to address provisions in regulations under various statutes that do not include credit unions as permissible financial institutions.
Permitting credit unions to enter into loan syndication agreements with credit unions in other provinces and removing differentiated rules for small credit unions.
Strengthening Ontario’s credit union consumer protection framework, as well as working with credit unions to explore voluntary commitments to provide notices of branch closures, and options for providing consumers with alternatives to high-cost payday loans.
The government intends to implement Ms. Albanese’s recommendations. These changes would improve the legislative framework for credit unions so they can continue to attract new members and grow, create jobs, contribute to Ontario’s economy, and ensure that consumers and deposits are well protected. The Province intends to propose legislation to modernize and replace the existing CUCPA. The new statute would improve the clarity of the framework governing credit unions and caisses populaires and result in improved efficiency for the sector. However, as a first step, the government intends to implement the recommendations relating to deposit insurance limits, subsidiary ownership rules, MUSH sector business, loan syndications and the removal of differentiated rules for small credit unions. Modernizing the Regulation and Oversight of Financial Services and Pensions
Over the past year, an expert advisory panel has been reviewing the mandates of the Financial Services Commission of Ontario (FSCO), the Financial Services Tribunal (FST) and the Deposit Insurance Corporation of Ontario (DICO), with the goal of modernizing the regulation of financial services and pension plans, and increasing agency accountability.
In November 2015, the panel released a preliminary position paper to provide insight into their initial views and to solicit feedback from the public. In this paper, the panel proposed significant reforms to the regulatory landscape, including the establishment of a new, independent and flexible regulator with a modernized governance and accountability framework.
The government is committed to modernizing and strengthening the regulation of financial services and pensions, and to improving consumer, investor and pension plan beneficiary protection. Necessary legislative or regulatory changes will be identified and pursued as early as possible.
The panel’s final report will be released this spring. Toronto as a Global Financial Hub
Toronto is the financial capital of Canada and a global financial centre — home to many leading banks, securities dealers, insurers and pension funds. As an internationally recognized financial hub, Toronto ranks as one of the best in the world — seventh on the U.K.’s The Banker magazine’s ranking and eighth on the U.K.-based Global Financial Centres Index. The government works with public-private partnerships, such as the Toronto Financial Services Alliance (TFSA), to successfully position Toronto as a global leader in financial services. Ontario is an excellent investment destination for international financial firms. Toronto is ranked fifth among North American cities for inward financial services foreign direct investment (FDI). Furthermore, the province continues to attract international capital investment from top financial firms, such as the announcement in 2015 by Nasdaq to invest in Ontario.9
Ontario is internationally recognized for its outward-oriented Canadian banks and life insurers, as shown by Toronto’s top performance in outward financial services FDI in North America, second only to New York City.10
In 2016, to advance the success of the financial services sector, the government continues to:
Fund the TFSA, in partnership with the private sector, to help increase jobs and investment in the financial services sector. The support for this critical economic engine for Ontario will build on the Toronto region’s strong international reputation as a global financial centre, while enhancing its competitiveness and growth prospects. Promote the creation of an Ontario “fintech” cluster of companies whose technologies support the financial services sector by promoting initiatives that support the development of highly educated high-tech talent and an innovative business environment in Toronto.
Foster the growth of the first North American Chinese currency trading hub, established in March 2015 in Toronto. This hub enables investors to access renminbi-denominated securities and foreign exchange services, and also lowers transaction costs for local importers and exporters when conducting business. 1 Mowat Centre, “Ontario Made: Rethinking Manufacturing in the 21st Century,” (February 2014).
2 Deloitte, “The Age of Disruption: Are Canadian Firms Prepared?” (April 2015).
3 International Monetary Fund, “World Economic Outlook,” (January 2016).
4 Henrik Braconier, Giuseppe Nicoletti and Ben Westmore, “Policy Challenges for the Next 50 Years: OECD Economic Policy Paper,” no. 9, (July 2014).
5 RGGI is a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont.
6 Analysis Group, “The Economic Impacts of the Regional Greenhouse Gas Initiative on Nine Northeast and Mid-Atlantic States,” July 2015.
7 PricewaterhouseCoopers, “Consumer Intelligence Series: The Sharing Economy,” (April 2015). 8 Bryant Cannon and Hanna Chung, “A Framework for Designing Co-Regulation Models Well-Adapted to Technology-Facilitated Sharing Economies,” Santa Clara & High Technology Law Journal 31, no. 1 (2015), 22–96.
9 Silvia Pavoni, “New York Leads, Toronto Gains,” The Banker, (December 2015).
10 Ibid. Chart Descriptions
Chart 1.1: Ontario Accounted for Almost Half of Venture Capital Investment in Canada in 2015
According to Thomson Reuters, in 2015, Ontario-based businesses received almost 50 per cent of all venture capital investments in Canada. Quebec received less than 30 per cent, while British Columbia received less than 15 per cent. The rest of Canada together received less than 10 per cent of national venture capital investment. Return to Chart 1.1
Chart 1.2: Changing Composition of International Exports
The bar chart shows the share of Ontario International Exports that was made up of goods and of services in the years 2004 and 2014. In 2004 Ontario exported $228.5 billion of goods and services, with goods exports accounting for $197.9 billion or 86.6 per cent of total international exports, while service exports accounted for $30.6 billion or 13.4 per cent of total international exports. Ten years later, in 2014, Ontario exported $242.6 billion of goods and services, with goods exports accounting for $198.2 billion or 81.7 per cent of total international exports while service exports accounted for $44.4 billion or 18.3 per cent of total international exports. Over the 10 year span, international service exports have increased by 45.2 per cent while international goods exports have risen by just 0.2 per cent. The share of Ontario’s international service exports to total international exports has increased by 4.9 percentage points, from 13.4 per cent in 2004 to 18.3 per cent in 2014. Return to Chart 1.2
Chart 1.3: Ontario’s Cap-and-Trade Program
This chart describes Ontario’s greenhouse gas emission reductions targets; how cap and trade works, and illustrates how cap-and-trade proceeds would be invested. Ontario’s Greenhouse Gas Reduction Targets:
Ontario has set emissions reductions targets of 15 per cent below 1990 levels by 2020, 37 per cent below 1990 levels by 2030 and 80 per cent below 1990 levels by 2050. Ontario has achieved its 2014 emission reduction target of 6 per cent below 1990 levels. How Does Cap and Trade Work?
Starting in 2017, a province-wide cap on greenhouse gases would be in place. Through 2020, the cap will decline each year.
The Province would distribute allowances through auctioning and free-of-charge allocation to industry. Emitters covered under the program must hold an allowance for every tonne of greenhouse gas emissions they release into the air.
As the cap declines each year, emitters would need to hold a sufficient number of allowances to cover their annual emissions. To comply, emitters could reduce their emissions or purchase allowances in the carbon market. Cap and Trade and Priority Investments
Proceeds from the auction of emissions allowances are expected to amount to $478 million in 2016–17 and $1.8–$1.9 billion annually starting in 2017–18. All proceeds will be dedicated to investments that support greenhouse gas emission reductions such as energy efficiency for homes and businesses, public transit, research, innovation and clean technology adaptation. Return to Chart 1.3
Chart 1.4: Corporate Income Tax Rates in Canada
This bar chart shows that Ontario has the second lowest general Corporate Income Tax (CIT) rate of 11.5 per cent when being compared with Canada’s federal and provincial general CIT rates. British Columbia has the lowest general CIT rate of 11 per cent and Nova Scotia and Prince Edward Island have the highest general CIT rate of 16 per cent. The federal general CIT rate is 15 per cent. Return to Chart 1.4
Chart 1.5: Ontario’s Internationally Competitive Corporate Income Tax Rate
This bar chart shows that in 2016, Ontario’s combined federal-provincial general Corporate Income Tax (CIT) rate of 26.5 per cent is lower than the average CIT rate of G20 and G7 member countries, at 28.2 and 30.5 per cent, respectively, and well below the average federal-state CIT rate in the United States (39 per cent) and the Great Lakes States (39.7 per cent).
Chart 1.6: Ontario’s Marginal Effective Tax Rate on New Business Investment Has Been Cut in Half
The marginal effective tax rate (METR) is a comprehensive measure of the tax burden on new business investment. It takes into account federal and provincial/state corporate income taxes, capital taxes and sales taxes. Ontario and federal tax changes have reduced Ontario’s METR from 33.2 per cent in 2009 to 16.3 per cent in 2015. By comparison, in 2015, the average METR for the United States was 34.7 per cent, and was 20.2 per cent for member countries of the OECD, excluding Canada.
Chart 1.7: Development of an Integrated Strategy to Support the Sharing Economy
The chart divided into four equal quadrants and outlines the Province’s four principles which will guide the development of its integrated strategy to support the sharing economy.
Quadrant 1: Promote a level playing field and tax fairness
Quadrant 2: Foster innovation and support new business
Quadrant 3: Protect workers, consumers and communities
Quadrant 4: Ensure a coordinated government approach is taken