Ontario is leading in many climate policy areas such as renewable energy, smart grids, and the recent announcement that it intends to join the Western Climate Initiative cap-and-trade system. As part of its climate policy framework, Ontario has committed to reinvest the proceeds from its proposed cap-and-trade system, in a transparent way, back into projects that will further reduce GHG emissions and improve business competitiveness. To meet this commitment, and create momentum in its transition towards a green economy, the province will need to encourage the deployment of a variety of new low-carbon technologies to change the way society supplies and uses energy.

The reinvestment of carbon revenue proceeds presents an opportunity to build Ontario based firms with capabilities to compete in the growing global market for clean technologies. It is perhaps an ideal time for Ontario to lead the way by implementing a strategic and comprehensive low-carbon innovation policy. A critical first step involves creating the right innovation institutions. This policy brief discusses critical public sector institutional design factors for policymakers to consider.