Ontario’s Cap and Trade Model

Teresa Madaleno

Government leaders across the globe have been talking about environmental policy changes since the climate talks in Paris. The province of Ontario is no exception. Ontario leaders announced in late February that they are closer to implementing a proposed greenhouse gas (GHG) cap-and-trade program, as part of their efforts to curb climate change.

Last year the government suggested a cap-and-trade program would be an effective tool to reduce GHG pollution by setting a limit on emissions, rewarding innovative business owners, and creating more opportunities for green investment.

Since the February announcement more details of the cap-and-trade bill have come out and the bill has gone through a second reading. Here is what the draft regulations are calling for…

Reduced emissions from over 150 emitters in four different categories
• Large industrial emitters with 25,000 tonnes or more of emissions of CO2 per year.
• Natural gas distributors with 25,000 tonnes or more of emissions of CO2 per year.
• Petroleum product suppliers that supply 200 litres or more of petro products during the year.
• Electricity importers if quantity of electricity imported during the year is greater than zero megawatt hours.

The proposed program would begin January 1, 2017. The compliance would work over a three-year period, with the first period ending December 31, 2020. The 2017 greenhouse gas emissions limit for Capped Emitters would be about equivalent to the projected emissions for that year. Afterwards, this cap would decline four to five per cent each year during the first compliance period.

Capped Emitters would have to retire emissions credits in the amount that is equivalent to their emissions for each compliance period. To do this they can invest in clean technologies and become less dependent on fossil fuel or acquire emissions allowances from the government. They can also consider purchasing emission allowances from other Capped Emitters or buy offsets from qualified offset projects.

These are just a few details about the proposed Ontario cap-and-trade regulations. Those who end up playing in this field will have a lot to consider. If and when the bill goes through final reading and becomes law, it’s important to review all the business implications.