Ontario showing substantial decline in manufacturing, Fraser Institute

A study prepared by The Frasier Institute says that Ontario now has the highest electricity costs across all Canadian provinces and among the highest costs in North America.

“Largely as a result of the Green Energy Act and its induced inefficiencies, Ontario electricity prices have soared, threatening industrial competitiveness, in particular that of the manufacturing sector for which electricity is a major input cost,” conclude the authors Ross R. McKitrick, professor of Economics, University of Guelph, and Elmira Aliakbari, senior economist, Fraser Institute

According to the study, Ontario has also exhibited the most substantial decline in its manufacturing sector over the past decade. McKitrick and Aliabakbari say that Ontario’s manufacturing sector accounts for almost 40 per cent of Canada’s exports, and that the decline is “a matter of national concern.”

More findings:

• Between 2005 and 2015, Ontario’s manufacturing output declined by 18 per cent and employment by 28 per cent.
• Notably, the paper manufacturing and iron and steel sectors, the two most electricity-intensive sectors in Ontario prior to the big price increases, shrank the most: the manufacturing sector by 32 per cent and the iron and steel sector by 25 per cent.
• Manufacturing in all provinces fell during the 2008 recession but bounced back elsewhere in Canada.
• Only Ontario has failed to recover to pre-recession levels. The drop in employment from 2008 onwards in Ontario was 14 per cent.

McKitrick and Aliabakbari write that rising electricity costs is a problem made in Ontario and that the issue is directly linked to the provincial government’s policy choices, which include “aggressively promoting renewable sources, structuring long-term contracts poorly, and phasing out coal.”

They conclude: “The significant employment losses in Ontario’s manufacturing sector and the overall stagnant employment and economic growth rates in this province should concern policy makers. We urge the government to consider meaningful reforms aimed at significantly lowering electricity costs in the province.”

Read the full report here.

Source: The Frasier Institute