Mid-term Objectives: An Urban Experience, Toronto, Ontario

Jim Hamilton

Case Summary

The City of Toronto in 1990 committed to reduce carbon dioxide emissions by 20% by 2005, relative to 1988 levels. To implement these mid-term objectives, the City has put in place several mechanisms including:

1. the City of Toronto’s Energy Efficiency Office (EEO); and

2. the Toronto Atmospheric Fund.

To reduce carbon dioxide emissions and energy use in general, EEO implements a range of programs focused on all sector’s of the Toronto community. Programs include:

1. the Better Buildings Partnership focusing on emissions emanating from built structures, including:

   1. the Better Transportation Partnership to encourage new energy-saving technologies;
   2. the Employee Energy Efficiency Program to reduce the use of energy within day-to-day operations; and
   3. The development of Toronto’s Energy Plan to identify future needs for energy and feasible options to meeting these needs.

2. The Energy Efficiency Office estimates that projects initiated through its programs have a value exceeding $100 million.

The Toronto Atmospheric Fund (TAF) was established in 1991 to promote global climate stabilization through financing local projects that reduce greenhouse gas emissions and/or absorb carbon from the air, educate the public in climate change matters, or foster climate-change partnerships with senior levels of government, educational institution, business and non-governmental organizations. Toronto City Council endowed TAF with $26 million to provide loans and/or grants to local projects on a revolving fund basis. Projects have ranged from installation of energy efficient street lighting, to “greenups’ of over 12,000 homes, naturalization of school yards, investments in energy retrofit projects, and the development of plans for the city’s Bikeway Network. In 2000, City council expanded TAF’s mandate to include the promotion of better air quality. From its inception to the end of 2002-2003, TAF granted some $7.9 million to various local projects. In addition, TAF loaned or made financial commitments of some $29 million in support of projects focused at reducing green house gas emissions.

Without belittling either mechanism, EEO programs can be thought of as focusing on established mechanisms to reduce greenhouse gas emissions such as energy performance contracting and in-house efficiency programs. TAF, on the other hand, appears to emphasize new approaches and solutions such as providing start-up financing to develop a car-sharing service for Toronto at 50 locations across the city and encouraging individuals and households to reduce noxious air emissions through limiting the use of two-stroke engines and/or replacing older small machines, such as lawn mowers, with newer models. Working together, both mechanisms have been remarkably effective in creating widespread support, both within the Toronto citizenry and supportive industries.

Sustainable Development Characteristics

Mid-term global change targets such as those identified for the Energy Efficiency Office and the Toronto Atmospheric Fund focus primarily on air quality and the reduction of green-house gas emissions. Through the Energy Efficiency Office, the targets are primarily being reached through the introduction of energy-saving technologies within buildings. In addition, efforts are being made to encourage the use of energy-saving vehicles as well as a community-wide recognition of the need for energy savings and how these can be accomplished. The Toronto Atmospheric Fund, to use its own words, ‘has focused largely on incubating community and city initiatives’ aimed primarily at energy efficiency, alternative means of transportation, the creation of carbon-sinks through the greening of, for example, houses, and/or school, and the possibilities of green power.

To summarize, the main sustainable development characteristics of the two programs are that of energy efficiency, and the creation of a livable community through the improvement of air quality.

Critical Success Factors

Critical success factors include:

1. the programs of both the Energy Efficiency Office and the Toronto Atmospheric Fund are participatory in design in that they place the final decisions for projects with outside decision-makers such as building owners, bankers, homeowners, school trustees etc. Active participation of the Toronto populace is essential for success. To this end , both organizations make considerable efforts to maintain this support;

2. the continuing support of City Council, both for supplying operating funds for the Energy Efficiency Office and for participation in roundtable discussions and environmental/sustainability planning; and

3. the availability of project financing using various mechanisms such as energy performance contracting, ‘on-bill’ financing, or free balances within existing capital budgets to finance projects.

Community Contact Information

Philip Jessup
Executive Director
Toronto Atmospheric Fund
1-416-392-0253

Mary Pickering
Associate Director
Toronto Atmospheric Fund
1-416-392-1217

Sean Cosgrove
Energy Efficiency Office
City of Toronto
1-416-392-1454

What Worked?

The mid-term targets and implementation mechanisms for climate change within the City of Toronto run parallel to those to develop a sustainable community. They have resulted in supportive financial mechanisms (See case study concerning energy performance contracting), have created a substantial network of interested parties, and have demonstrated that success is possible. To a large degree, much of the success of both agencies can be attributed to the continuing strong support of the City of Toronto Council as well as local community leaders. In the case of the Toronto Atmospheric Fund, the initial endowment as well has enabled the agency to focus on the development of new projects and community collaboration as opposed to fund raising.

BBP and TAF have initiated several innovative financing vehicles that have resulted in the go-ahead of several projects. Included within this are the loan Recourse Fund in the case of BBP and the substitution of leasing arrangements for purchases of appliances in the case of TAF. TAF has also pioneered techniques to finance energy efficiency improvements in new condominiums using ongoing condominium fees as opposed to initial purchase prices for the condominium units as a means to make the financing of the improvements more amenable to home-owners.

What Didn’t Work?

The targets are mid-term and are limited to a sub-set of sustainable community objectives. In addition, the targets and implementation strategies, although successful in themselves, have been put in place without the benefit of detailed and integrated objectives related to other aspects of sustainability within the Toronto area such as urban infill, the creation of village centres or sustainable transportation. In this regard, Toronto has developed an Environmental Plan and created a Roundtable on the Environment to deal with sustainability matters.

The planning process is essentially target-based, and not supported in any methodical sense with concomitant adjustments to municipal planning and/or decision processes. The upshot of this is that it is difficult to initiate and/or implement, but impossible wider projects such as an energy-savings project that requires the co-operation of a multi-residential building, a near-by factory and a local school to be fully effective or even financially viable.

Financial Costs and Funding Sources

The Energy Efficiency Office forms part of the municipal government of the City of Toronto, and as such its operating costs are subsumed within the City’s budget. Funding for projects initiated through the programs of the Energy Efficiency Office come from:

1. the Energy Efficiency Office, mainly for smaller demonstration-style projects such as the Employee Energy Efficiency at Home Project, and planning and policy development;

2. the private sector for large-scale energy efficiency improvements using performance contracting. Over $100 million has been invested since the inception of the program;

3. the Toronto Atmospheric Fund for bridge financing of energy efficiency projects; and

4. the innovative Better Buildings Initiative Loan Recourse Fund to finance projects within the multi-residential and medium/small buildings sectors through loan securitization and adding loan repayments to gas.

The City of Toronto endowed the Toronto Atmospheric Fund with $26 million in 1992 following the sale of real property assets. The Toronto Atmospheric Fund uses income received from this endowment to finance loans and grants to projects initiated within either the private or public sectors.

Research Analysis

Analysis of this case study presents leads to three key observations:

1. The mid-term targets and implementation mechanisms for climate change within the City of Toronto run parallel to those to develop a sustainable community. They have resulted in supportive financial mechanisms, have created a substantial network of interested parties, and have demonstrated that success is possible. The consequence is that mid-term programs, when participatory in nature, most likely will provide a good base for further more in-depth planning with respect to sustainability within communities.

2. The Toronto targets, with all of their success, are mid-term and are limited to a sub-set of sustainable community objectives. In addition, the targets and implementation strategies, although successful in themselves, have been put in place without the benefit of detailed and integrated objectives related to other aspects of sustainability within the Toronto area, such as urban infill, the creation of village centres or sustainable transportation. In this regard, Toronto has developed an Environmental Plan and created a Roundtable on the Environment to deal with sustainability matters.

3. Funding to finance the achievement of mid-term targets can be enormous. In Toronto, over $100 million has already been invested, using private sector lending techniques. Estimates suggest that this represents only a small portion of total potential investments.  

Detailed Background Case Description

The Objective

The City of Toronto committed in January of 1990 to reduce the city’s net CO2 emissions by 20 percent by the year 2005, relative to 1988. To attain this, the city undertook several initiatives, two critical ones being the various programs associated with the Energy Efficiency Office and the loans and grants of the Toronto Atmospheric Fund.

The Overall Strategy of the Energy Efficiency Office

The City of Toronto’s Energy Efficiency Office develops and coordinates an energy efficiency and conservation strategy for the City. In a nutshell, the strategy involves all sectors of the city (i.e. governmental organizations, universities, schools, business and citizens) in a mid-term effort to conserve energy and be energy efficient. The strategy emphasizes public participation as well as a wide dissemination of energy-conserving knowledge. The strategy also focuses attention on the monetary savings that accrue to better energy use, and tries to lever these in various fashions to finance energy-savings investments using private-sector financing. While difficult to fully measure as many investments made as a result of EEO activities are not always recorded (such as those encouraged within the residential sector), total investments made as a result of EEO programs are well above $100 million accounting for approximately 4% of the 1988-based target. The City estimates that potential investments using EEO supported, and private-sector financed mechanisms could exceed $3 billion.

Programs of the Energy Efficiency Office

EEO programs impact most aspects of energy use within Toronto, and are specifically designed to serve the varying needs of the residential, commercial and institutional sectors. Programs include:

1. Technical Assistance and Support to the industrial, commercial and institutional sector through:

   1. project support,
   2. administration of consultant studies,
   3. database development of energy efficiencies gained through EEO programs, and
   4. technical assistance to in the review of Toronto Atmospheric Fund applications for loans and/or grants.

2. Enhancement of Residential Energy Awareness through:

   1. information booths,
   2. public presentations, Home and trade shows such as the City of Toronto Renovation Forum, and
   3. web sites,

3. The Better Buildings Partnership consisting of a series of sub-programs including:

   1. the Large Office building Program which has already resulted in some $100 million in energy savings investments using energy performance contracting,
   2. the Small/Medium Commercial Buildings Program that provides technical information and financing techniques through the Loan Recourse fund to assist this sector to realize energy savings. The Loan Recourse Fund provides financing, through Enbridge Consumers Gas, by offering “on-gas-bill” financing and collecting to eligible building owners. (Traditionally, financial constraints on small/medium commercial properties typically make project financing difficult to obtain),
   3. the Multi-Residential Non-Profit Buildings Program Buildings, again using financial techniques such as energy performance contracting, to lower the operating and maintenance costs of multi-residential structures through energy and water conservation,
   4. the In-House Energy Efficiency Program which retrofits municipally owned buildings,
   5. the Loan Recourse Fund (see above) to provide innovative funding through Enbridge Gas Distribution Inc to building owners by securitizing loans. The fund, in essence, levers or takes advantage of often unrecognized monetary savings accruing from better energy use, and
   6. the BBP Building Registry Program to recognize and celebrate building owners achievements in conserving energy,

4. The Employee Energy Efficiency at Work Program to promote energy conservation through the better management of office equipment power loads. For example, the methodical shutting-down of office copiers during non-office hours can save up to $50 per machine in unused energy,

5. The Better Transportation Partnership which is a public-private partnership to reduce smog emissions through seeking out new and emerging technologies. For example, the partnership purchased more than 100 alternatively fuelled vehicles for incorporation into the city of Toronto fleet, and

6. The Better Buildings New Construction Program which provides incentives to have new buildings designed to be at least 25% more energy efficient than those designed only to meet minimum requirements of the Model National Energy Code for Buildings as issued by the National Research Council.

The Overall Strategy of the Toronto Atmospheric Fund

The Toronto Atmospheric Fund (TAF) was established in 1991 to promote global climate stabilization through financing local projects that work towards that end. TAF’s mandate is to promote:

1. global climate stabilization through the reduction of greenhouse gas emissions such as carbon dioxide and methane,

2. local air quality,

3. energy conservation and efficiency,

4. public understanding of global warming and its implications for the urban environment,

5. "Carbon sinks" such as Toronto's urban forest that absorbs carbon dioxide from the air,

6. related scientific research and technology development; and

7. partnerships with non-governmental organizations, other levels of government, business and academic institutions.

To undertake its mandate, the Toronto City Council endowed TAF with $26 million to provide loans and/or grants to local projects on a revolving fund basis. The endowment came from the sale of municipally held lands. TAF-sponsored projects ranged from installation of energy efficient street lighting, “greenups’ of over 12,000 homes to naturalization of school yards, and the development of plans for the city’s Bikeway Network. From its inception to the end of 2002-2003, TAF has granted some $7.9 million to various local projects. In addition, TAF has loaned or made financial commitments of some $29 million in support of projects focused at reducing green house gas emissions.

TAF's stated priorities for the period 2003-2006 are in the areas of:

1. renewable energy,

2. energy conservation and efficiency, and

3. reducing the fossil fuel content of energy sources.

Community Efforts and Programs of the Toronto Atmospheric Fund

Public education and outreach is a key element in TAF’s commitment to global climate change stabilization. To undertake this and serve as its public education and outreach partner, TAF created the Clean Air Partnership (CAP), a registered charity founded in June 2000. To achieve its mandate in support of TAF, CAP delivers programs such as:

1. publishing Clean Air and Environment Guide and distributing it to over 1.7 Ontarians,

2. delivering 20/20 The Way to Clean Air, a program to encourage individuals and households to reduce their own air emissions such as reducing the use of two-stroke engines and/or replacing older small machines, such as lawn mowers, with newer models,

3. hosting the GTA Clean Air Online website,

4. working with students and teachers to reduce waste in schools through CAP’s Cool Schools program, and

5. hosting the annual Smog Summit, and the GTA Clean Air Council, an intergovernmental group including towns, cities, and all four regional governments in the GTA.

Typical Loans and Grants of the Toronto Atmospheric Fund

TAF makes about $8 million of its endowment fund available to finance mandate-related initiatives. For example, TAF provided:

1. bridge financing to the Toronto Renewable Energy Co-operative to support construction of the Exhibition Place wind turbine,

2. start-up financing to Autoshare to develop a car-sharing service for Toronto at 50 locations across the city,

3. financed Toronto Artscape Ltd to retrofit in two Toronto artists' facilities - 1313 Queen Street West and Gibraltor Point Centre for the Arts, and

4. green loans to Tridel to finance the incremental costs of constructing new condominiums that exceed energy efficiency standards set out in the Model National Energy Code by 30 percent. An initial test project, Verve, is now on the market, and ten more are planned.

Using interest accruing from its endowment, TAF provides grants to local projects. Typical of these are those made in 2004 as described in the following:

Other Resources

Natural Resources Canada, Office of Energy Efficiency, Buildings Division

Strategic Questions

1. Both BBP and TAF make wide use of financial incentives to achieve their objectives. Are these sufficient or are stronger mechanisms required such as regulations?

Resources and References

Major references for this case study include:

City of Toronto Toronto Atmospheric Fund

Toronto Atmospheric Fund, Consolidated Financial Statements of the Toronto Atmospheric Fund for Year Ended December 31, 2005

Toronto Atmospheric Fund Toronto Atmospheric Fund 10^th Anniversary Report

Toronto Atmospheric Fund 2002-2003 Annual Report

Moving Towards Kyoto: Toronto's Emission Reductions 1990-1998 - Technical Report - RIS International Ltd. & Torrie Smith Associates Inc. - April 22, 2003

Moving Towards Kyoto: Toronto's Emission Reductions 1990-1998 - Policy Report - RIS International Ltd. & Torrie Smith Associates Inc. - April 22, 2003

The City of Toronto's Corporate Energy Use and CO2 Emissions, 1990-1998: A Progress Report - Philip Jessup, June 1, 2001