A:
The landmark Green Energy Act will boost investment in renewable energy projects
and increase conservation, creating green jobs and economic growth to Ontario. This
legislation is part of Ontario’s plan to become a leading green economy in North
America.1
GEA will:

Spark growth in clean and renewable sources of energy such as wind, solar,
hydro, biomass and biogas in Ontario.

Create the 1potential for savings and better managed household energy
expenditures through a series of conservation measures.

Create 50,000 jobs for Ontarians in its first three years.
B:
The Green Energy Act attempt to attract new investment, create new green
economy jobs and better protect the environment. Moreover, the GEA will provide
the government with tools to propel Ontario into a leadership position in renewable
energy, and to create a culture of conservation, assisting homeowners, government,
schools and industry in embracing lower energy use. The GEA will offer a wide range
of economic opportunities for manufacturing and skilled labor as well as new
renewable ventures for aboriginal communities, farmers and community groups in
rural Ontario or for urban dwellers, schools or companies looking to invest in rooftop
solar to cut their electricity costs.
C:
As David Barrows defined, “competitiveness is the ability to design, produce and
market goods and services, the price and non-price characteristics of which from a
more attractive package than those of competitors (Barrows 3).”2 The goals of
1
Ministry of Energy and Infrastructure: Green Energy Act, 8 June. 2010
<http://www.mei.gov.on.ca/en/energy/gea/>
2 Barrows David, Cotsomitis, “Canada’s Global Competitiveness”, in Tom Wesson, Canada and the New World
Economic Order, Third Edition, Captus Press, 2007-P3
competitiveness are to increase wealth, gain personal freedoms, increase security,
and better the quality of life
1. Poor productivity associated with high wages
As the world economy grows dramatically in the past fifty years, international trading
has created a strong competitive environment both globally and domestically. By
assessing trade performance in traded and non-traded sectors, it is determined that
for Canadian competitors to successfully enter the international market, either as
exports or as imports competition in domestic market, high productivity is
significantly needed in traded goods and services ( Barrows 9).3 This approach of
trade performance assesses our traded manufacturing industries in three types of
businesses: resource-based, low-wage and high-wage businesses. On the other hand,
“Canada has not been considered a high-technology country (Barrows 156).”4
High-technology trade is normally carried out by high-wage businesses, which
consists of mature manufacturing, high-growth, and merging businesses. To be good
at high-wage industries, a firm must have high productivity, low costs, uniqueness,
and a brand name. Those businesses may compete on cost leadership in each
department, consumer preference on brand name, uniqueness, low cost, and quality
in services and innovation. In addition, Canadian industries continue to rely on
abundant basic factors of production, with little emphasis on upgrading and factor
specializations. Most economists found that “Canada’s productivity gap is a product
innovation gap”(Trefler 2)5. Canadian’s failure to introduce innovative products lies at
the heart of its poor productivity performance. To reflect the weakness in innovation
sector, research and development indicators had shown that Canada invests a
significantly lower portion of domestic expenditures in R&D activities than most of its
major competitors, in turn, causing low competitiveness in premium-price products.
In addition, an examination of Canada’s export activities in the service sector
3
Barrows David, Cotsomitis, “Canada’s Global Competitiveness”, in Tom Wesson, Canada and the New World
Economic Order, Third Edition, Captus Press, 2007-P9
4 Barrows David, Cotsomitis, “Canada’s Global Competitiveness”, in Tom Wesson, Canada and the New World
Economic Order, Third Edition, Captus Press, 2007-P156
5 Trefler Daniel Quality VS. Quantity: Canadians are Good at Cutting Cost, But Not So Good At Making
Cutting-Edge Products 7June 2010 <
http://www.rotman.utoronto.ca/~dtrefler/papers/Quality%20Vs.%20Quantity.PDF>
suggests a relatively weak competitive position among major developed countries.
(Wesson: 13)6 In contrary to high-wage businesses, low-wage businesses have
competitive advantage in implementing low-wage cost. Therefore, Ontario faces a
huge challenge through poor productivity and high wages.
2. declining GDP to be 2% for Ontario for 2010 and raising corporate tax to 14%
By examining the components in GDP calculation, Brean reported that “Canadian
economic growth is led by consumption and investment”. The world financial system
crisis can be traced to aggressive mortgage lenders in the U.S. and to the lax lending
standards of western European banks on their loans in Eastern Europe. Still, the
dramatic decline in U.S. demand for Canada’s exports, together with falling equity
values and commodities prices, contributed to a 3.4 per cent contraction in Canada’s
real GDP in the fourth quarter of 2008.7 Without doubt, the prediction of GDP will
decline by 2% has an extremely negative impact on Canadian economy. On the other
hand, researchers have found a substantial negative relationship between corporate
tax rates and real wages with one study finding that a 1 percentage point reduction
in corporate tax rates leads to a 0.8 percent increase in real manufacturing wages
(Hassett and Mathur, 2006).8 In addition, Mr. Mintz and other analysts say Ontario's
tax regime, as currently structured, is suffocating the province's ability to attract
investment and rebuild the economy.9 All of those findings indicate that, both
decrease in GDP and increase in corporate tax for Ontario will harm Ontario economy,
and Ontario government needs to prepare to meet all these challenges.
3. deficit spending to the manufacturing sector, especially to the automotive sector
and other struggling sectors, such as forestry
Ontario suffered from a cumulative two-year deficit of $18-billion in 2009 because of
a combination of mismanaged public finances and the ascent of emerging economies
6
Barrows David, Cotsomitis, “Canada’s Global Competitiveness”, in Tom Wesson, Canada and the New World
Economic Order, Third Edition, Captus Press, 2007-P13
7 Economy: Income Per Capita, 7 June 2010
<http://www.conferenceboard.ca/hcp/details/economy/income-per-capita.aspx>
8 Latest Release From the Labor Force Survey, 5 June, 2010 <
http://www.statcan.gc.ca/subjects-sujets/labour-travail/lfs-epa/lfs-epa-eng.htm>
9 Ontario in Decline 10 June, 2010 < http://www.financialpost.com/news-sectors/story.html?id=1410203>
at the expense of high-cost manufacturing. Mr. McGuinty pours tens of millions of
dollars to the manufacturing sector, particularly automotive, through targeted tax
relief or direct subsidies. The manufacturing sector, and its high-paying jobs, used to
be the province's shining point. But as a component of Ontario's GDP, it has dropped
from on factors such as a richer Canadian dollar, higher energy costs and offshore
competition. Under Mr. McGuinty, program spending climbed more than 10% to
$87.6-billion, compared with a 5.4% increase in tax revenue in fiscal year 2007-2008.
To help pay for this, Mr. McGuinty raised the corporate tax -- to 14% from 12%.10
10Ontario
is going to be deeply challenged, because it is going to be very hard for the
government to deal with when the province is so restrained.
4. Weak economic growth, especially the loss of jobs
Canada as a whole is a small economy with a population of about 30 million and thus
is depending on trade for a major portion of its produce. Canada’s largest trading
partner is the United States which accounts for more than 85% of its total exports
and this is a major contributor to Canada’s GDP. Thus Canada is highly depends on
the U.S. to sell most of its production and was the largest exporter to the Unites
States till the year 2005.11 In the era of globalization, it is essential to be competitive
in terms of price and quality in order to be successful in the market place. Economic
growth and competitiveness are highly correlated. The primary cause of slowing
economic activity in Canada will be a deteriorating U.S. economy. Canada's economy
is closely linked with the U.S. economy. With a pull-back in U.S. consumption on the
horizon, demand for Canadian products will moderate further, 76% of which are
destined for the American marketplace, reducing exports and overall economic
activity. As a result, the likely source for job losses will come in industries directly
related to trade with the U.S. such as manufacturing. The economic downturn leads
the unemployment rate growing. Since September 2008, the unemployment rate
10
Ontario in Decline: From Canada’s Economic Engine to Clunker 10 June, 2010 <
http://www.financialpost.com/news-sectors/story.html?id=1410203>
11 Barrows David, Cotsomitis, “Canada’s Global Competitiveness”, in Tom Wesson, Canada and the New World
Economic Order, Third Edition, Captus Press, 2007-P14
remains high at 8.7%, even higher than 8.1% in United States, which means Ontario
will face a serious weak economic problem until U.S. economy restitution.12
In conclusion, the results of measurement by economic indicators on Canada’s global
competitiveness are summarized into several general weaknesses: 1) only exposed to
single market – United States; 2) only specializes in trading narrow products;3) poor
R&D department; those led to a huge challenge to Ontario’s declining competitive
position.
D:
Pros:
(1) Green products: In terms of achieving the highest quality of life, as defined by
Mike Harris and Preston Manning, improving services like health care and making
the physical environment for Canadians safer are some of the key issues to be
addressed to achieve this vision.13 Thus the Green Energy Act, initiated by the
Ontario Government is a first step in this direction. As mentioned earlier, such an
initiative would put the Canadian industries at a disadvantage in the short-run.
But once the investments are made and the initiatives are taken, it will reap
long-term benefits. This is so because most countries around the world are
realizing the need to reducing pollution and preserve the environment for the
future generations. Through the Green Energy Act, Canada could become a
leader and trend-setter in producing “green products”. As other countries move
towards implementing measures to combat the issue of the abuse of energy,
they will prefer products which are already green and would prefer to purchase
Canadian-made products.
(2) Environment: The GEA will continue to make energy conservation a priority in the
province by making energy efficiency a key purpose of Ontario’s building code.14
12
Is Canada’s Job Machine Unstoppable? 9 June 2010 <
http://www.td.com/economics/special/bc0408_labmkt.jsp>
13 Harris, Mike “A Canada strong and Free” in Tom Wesson, Canada and the New World Economic Order, Third
Edition, Captus Press, 2007 p340
14 Ministry of Energy and Infrastructure: Green Energy Act,
8 June. 2010
<http://www.mei.gov.on.ca/en/energy/gea/>
Most countries around the world are realizing the need to reducing pollution and
preserve the environment for the future generations. The GEA plans to eliminate
coal from the power supply. Coal-fired generation is the single largest of air
pollution in Ontario and eliminating it from the supply mix will be a huge climate
change initiative in Canada. Moreover, the GEA is support the development of
new renewable energy projects, and prepare Ontario for new technologies like
electric cars. Also, the GEA create the potential for savings and better managed
household energy expenditures through a series of conservation measure.15
Therefore, using less energy is the smart strategy for our environment and
making the earth a better place to live.
(3) Create jobs: Building a stronger, greener economy with lasting, well-paying jobs
for Ontarians is a key goal of the GEA. As mentioned earlier, the GEA will create
50,000 jobs for Ontarians in its first three years.16 During this big recession
period, people are facing the crisis of unemployment. The GEA creates plenty of
great job opportunities for Ontarians. Knowledge workers and the skills they
posses are the primary resource for the economy; that is human resources and
knowledge capital is an important source of competitive advantages for a nation
(Barrows 31).17 In order to fit those positions, more and more educated and
skilled employees will flow into Ontario job market which in a way conduces to
Ontario economic growth.
Cons:
(1) Increase in cost: With the Green Energy Act, it is more likely that the cost of
production would be higher, since it would require significant investments in
up-grading the facilities, and this cost eventually would be passed on the
end-consumer. Most capital-intensive industries will be adversely impacted by the
adoption of the Green Energy Act. Thus as a result, the Green Energy Act will have
15
Ministry of Energy and Infrastructure: Green Energy Act, 8 June. 2010
<http://www.mei.gov.on.ca/en/energy/gea/>
16 Ministry of Energy and Infrastructure: Green Energy Act,
8 June. 2010
<http://www.mei.gov.on.ca/en/energy/gea/>
17 Barrows David, Cotsomitis, “Canada’s Global Competitiveness”, in Tom Wesson, Canada and the New World
Economic Order, Third Edition, Captus Press, 2007-P31
adverse impacts on the Canadian business which would be unable to offer products
at the same low cost as the other developing nations. It is important that Canada
remain cost competitive in the global market. Using the Trade Indicators, it can be
observed that while exports contributed about 42% of Canada’s GDP, it was only
about 12% for the United States (Barrows 14).18 As a result of this, the Canadian
economy would experience difficulty in generating wealth for the Canadians and
should thus move to high-technology trade to be able to maintain its edge in terms
of exports.
(2)Increase in energy price: Canada ranks very poorly in R&D and internationalization.
This is where the Government needs to focus and support the industries to be more
competitive by encouraging investment in R&D. In order to achieve competitiveness,
it needs to focus on productivity enhancement through innovation and also offer
higher-value added products to differentiate it from the low-cost manufacturing
destinations (Barrows 15).19 Since 2003, total investment in renewable energy
project in Ontario is over $4.6 billion.20 Furthermore, people who work for energy
renewable projects get well-paid according to GEA. As the cost increased, the energy
price will increase eventually. Since the 2008 economic crisis, Canada’s economy has
not fully recovered; thus increase in utility price will no doubt increase the financial
burden of Ontario citizens. Especially for low income family, they cannot afford this
extra cost. If the government fails to handle well, the renewable energy project will
ultimately harm Ontario economy.
(3)Regulation is bad for business: instead of penalizing businesses with unattainable
goals for emissions, the government should give incentives and encourage businesses to
add environmentally friendly practices.
The GEA plans to eliminate coal from the
power supply. Think about local coal companies. Coal mining companies make up a big
percentage of total utility in Ontario. If the legislation force those companies to close,
18
Barrows David, Cotsomitis, “Canada’s Global Competitiveness”, in Tom Wesson, Canada and the New World
Economic Order, Third Edition, Captus Press, 2007-P14
19 Barrows David, Cotsomitis, “Canada’s Global Competitiveness”, in Tom Wesson, Canada and the New World
Economic Order, Third Edition, Captus Press, 2007-P15
20 Ministry of Energy and Infrastructure: Green Energy Act,
8 June. 2010
<http://www.mei.gov.on.ca/en/energy/gea/>
millions of people face the risk of unemployment. Thus Ontario economy will get a heavy
blow.
Bibliography
Barrows, David. Canada's Global Competitiveness. In Tom Wesson. Canada and
the New World
Economic Order. Concord: Captus Press, 2007
Barrows, David. International Trade and Investments. In Tom Wesson. Canada
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Harris, Mike “A Canada strong and Free” in Tom Wesson, Canada and the New
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Is Canada’s Job Machine Unstoppable? 9 June 2010 <
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Ontario in Decline: From Canada’s Economic Engine to Clunker 10 June, 2010 <
http://www.financialpost.com/news-sectors/story.html?id=1410203>
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Good At Making Cutting-Edge Products 7 June 2010
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ty.PDF>