It's The Economy, Stupid

I was talking with a friend in Ontario who tells me that McGuinty’s green energy agenda is going to be a wedge issue in the Ontario election.  The Tory leader is promising to scrap the deal with the ‘foreigners’ Samsung and drop/eliminate the feed-in tariff program for wind, solar, etc.   I am not sure about this as it seems the Liberal’s trouble is likely more due to just length of time in office.    These days it seems the voters are less likely to vote parties in over and over.

It seems to me that McGuinty needs to hammer his economic agenda around this.  As I have posted before the green business was only a small part of it.  If it was only about green energy, as Ignatieff rightly pointed out, you could bring down hydro-electricity from Northern Quebec and Labrador and wipe out all the carbon emitting electricity production in a decade – at costs well below wind, solar, etc.

But for McGuinty, his real goal was to create a green energy cluster in Ontario.  Tens of thousands of jobs in manufacturing, R&D, head offices, services, etc. and the price for that was a rise in the average cost of electricity by some percentage (this percentage is debated but most of Ontario’s new power is going to be natural gas and nuclear powered).  He is gambling the public will accept a modest increase in power rates in return for the jobs and the taxes.

The Ontario government has probably the best sense of its economic reality of any province in Canada.  It knows that it cannot rely on royalty revenue such as NL, SK and AB.  If it loses economic activity in a foundational industry such as auto manufacturing, it has to be made up elsewhere.    Green energy seemed like a logical play.

You know my view on this stuff.    If government can be a major customer that seeds a new industry (think telecom in Ottawa) that is a valid way within reason to promote economic development.  I contrast that with New Brunswick which now has more installed wind energy than any other province except PEI as a percentage of its energy demand and virtually no indigenous industry – a little bit on the support side but no manufacturers, very little product-based R&D, very few jobs in services.   This is Ontario’s vision.  All the value added economic activity there.  Provinces like New Brunswick consume and send them money back to Ontario.  Just like auto, aero, pharma, much of finance, a lot of ICT, etc.    We consume products/services manufactured in Ontario.

Hudak’s promises, however; could end up causing considerable economic upheaval.  Can you put the Genie back in the bottle?   Or maybe the Genie can go back into a barrel, not a bottle?   All the companies, including Samsung, have only created a fraction of the promised jobs.  If they all cancel their expansion in Ontario, what happens?