On April 13, 2015, Ontario Premier Kathleen Wynne announced that
her province will join Québec and California's cap-and
trade-program for the regulation of greenhouse gas emissions.
Ontario's participation in the program is intended to limit
and, over time, significantly reduce its emissions.
The primary mechanism of a cap-and-trade system is prescribed
and enforceable greenhouse gas emission caps. These are established
for industries and commercial enterprises in specified
sectors of the economy. Those regulated are required to acquire
allowances to emit to their capped levels. Allowances may be traded
between regulated entities. The cost of the allowances, either when
issued by government or as set in the allowance trading market,
creates a cost for the emission of carbon, the price incentive to
A cap-and-trade system may also permit offset credit creation
– the creation of credits which may be used just as emission
allowances are used, although to a limited percentage of one's
total emissions. Offset credits may be derived from projects in
unregulated sectors which limit or avoid greenhouse gas emissions.
They may only be created in accordance with approved protocols,
such as in Québec for landfill gas capture.
The design of the system is critical to its effectiveness, the
regulatory burden it imposes and its cost to the economy.
Ontario's announcement on Monday indicates there will now be a
period of consultation in the coming months on design elements.
However, much of the design can likely be gleaned from what is
already in place in Québec and California, and
the work of the Western Climate Initiative (WCI), which is the
foundation for the Québec – California
Fundamental to the system will be the levels of the caps –
to what percentage of historic emissions for each sector are the
caps to be set? What, if any, credit will be available for early
action, pre-regulation greenhouse gas reductions? Which sectors
will have to pay for their allowances, and how will those prices be
set? Which sectors may be granted allowances gratis as a means of
easing their adjustment into the system? What projects will be
considered for offset credit creation, and under what offset
protocols? And of course we look forward to an announcement as to
the first compliance period.
Ontario's Climate Change Discussion Paper 2015 identified
the relative contribution to greenhouse gas emissions in the
Province by commercial sector:
Clearly transportation, industrial and building emissions are
the largest contributors to the Province's emissions. Emitters
in those sectors likely have the largest stake in the design of the
Just prior to the PanAm games, on July 7, 8 and 9, 2015, Ontario
will host the Climate Summit of the Americas in Toronto.
Representatives from North, South and Central America's
national and sub-national governments are expected to be
present. Might this be a platform for announcements of further
expansion of the Ontario-Québec-California
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