A report from a coalition of Canadian environmental organizations has called on the Province of Ontario to eliminate subsidies and the health and environmental costs externalized to the rest of society as a result of burning coal, which benefit the generation of electricity. By cutting the nearly C$ 8 billion that the group says went to subsidizing electricity in 2006 (40 percent of which includes non-internalized environmental and health costs), homeowners would do more to conserve energy, and businesses would be forced to become more efficient.

The report from the Clean Air Alliance provides an overview of the largest subsidies to electricity, which mainly come in the form of support to coal and nuclear generators, and suggestions on how those subsidies could be eliminated. According to the study, an immediate withdrawal of the subsidies would cause electricity rates to rise by approximately 60 percent. The report recommends a ten-year plan, which it says could be achieved by raising rates by 3.5 percent a year.

Residential customers would be better off financially, given that some 67 percent of electricity is consumed by commercial users, who benefit from taxpayer subsidies, says the report. By cutting subsidies, residential consumers could be offered a rebate that would more than offset the higher cost of electricity.

For larger industrial users, which may find it hard to lower their electricity use in the short term, the report recommends new subsidies that would help them adapt and provide additional revenue. For example, these users could be paid to reduce electricity use during peak hours, and be given money to install biomass and natural gas-fired combined heat and power plants.

The Clean Air Alliance identifies the following subsidies and non-internalized environmental and health costs:

Subsidy #1 - Below-Market Water Royalty Rates $1.9 billion 
Subsidy #2 - Below-Market Return on Equity $0.851 billion 
Subsidy #3 - Corporate Income Tax Revenue Subsidy for Nuclear Debt $0.949 billion 
Subsidy #4 - Sales Tax Exemption $1.085 billion 
Subsidy #5 - Northern Pulp and Paper Electricity Transition Program $0.047 billion 
Subsidy #6 - Public Health and Environmental Subsidy for Coal-Fired Generation $3.1 billion 
Subsidy #7 - Subsidies for Nuclear Power Decommissioning and Long-Term Storage of Radioactive Nuclear Wastes Unknown 
Subsidy #8 - Nuclear Liability Act Unknown 
Subsidy #9 - Average Cost Pricing Unkown 
Subsidy #10 - Bulk Metering Unknown 

TOTAL $7.932 billion

The report, Tax Shift: Eliminating Subsidies and Moving to Full Cost Electricity Pricing is available on-line at: 
http://www.cleanairalliance.org/resource/taxshift.pdf