Yesterday, Ontario announced that it will impose a cap-and-trade
system under the Western Climate Initiative, which it joined in
2008. The "cap" will set a maximum limit on the amount of
greenhouse gas emissions that industry can produce in Ontario. Over
time, this emissions cap will be lowered, reducing emissions. The
"trade" will create a market for carbon credits
distributed or auctioned by the government. Companies that do not
use all their credits can sell to emitters that exceed the cap.
Over the next six months, the public will be consulted on the
details for the "made-in-Ontario" cap-and-trade
Ontario and Québec also announced yesterday a statement
of intent to reduce carbon emissions through a linked cap-and-trade
system. Québec's cap-and-trade system took effect in
2013 and was linked with California's system in 2014.
Québec's system currently applies to large electricity
generators, industrial facilities and distributors of
transportation and heating fuels. Over the coming months, Ontario
will work to align its cap-and-trade market with both the
Québec and the California markets. This expanded carbon
market is expected to help improve market stability, minimize
implementation costs and provide a consistent approach to
greenhouse gas emitters in both provinces.
Many Canadian business leaders had initially called for a
national carbon pricing system to avoid the emerging patchwork of
provincial approaches (e.g., British Columbia's carbon
tax, Alberta's baseline and credit system, Québec's
cap-and-trade system). However, given that the proposed federal
sector-by-sector regulatory approach is stalled, coordinated
provincial action is increasingly seen as the more practical and
efficient way to move forward in reducing Canada's greenhouse
Davies will follow the creation of Ontario's cap-and-trade
system and its alignment with the Québec and California
carbon markets. Key issues to watch will be Ontario's emissions
cap and how quickly it will be lowered, the scope of the industrial
sectors to be regulated, how Ontario intends to protect
carbon-intensive, trade-exposed industry and opportunities for the
creation and trade of offsets.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Ontario's Ministry of the Environment and Climate Change continues to roll out its Climate Change Action Plan with its proposed GHG guide for projects that are subject to the province's Environmental Assessment Act.
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