Canada: A More Detailed Look: Proposed Options For Ontario's Cap-And-Trade Program

Last Updated: November 27 2015
Article by Selina Lee-Andersen

Most Read Contributor in Canada, September 2018

As noted in our earlier posting, the Ontario government announced in April 2015 that it would implement a cap and trade program that would eventually be linked with the existing cap and trade systems in Québec and California. Following extensive public consultations over the summer, Ontario has released its Cap and Trade Program Design Options paper, which is open for public comment until December 16, 2015. As part of the current consultation process, the Ontario government is seeking input on various elements of the program design including timing, scope of the program, caps on greenhouse gas emissions, allowance distribution, price stability mechanisms, market design features, compliance requirements, flexibility mechanisms and enforcement. Feedback will inform the development of a regulatory proposal for the cap and trade program, which is expected to be tabled in early 2016. This will be followed by another round of public consultations before the cap and trade regulation is finalized.

Ontario's proposed cap and trade program will be the primary tool to help the province to achieve its 2020 emission reduction target of 15% below 1990 levels. In particular, the program seeks to reduce the amount of the province's greenhouse gas emissions by setting a cap on emissions from regulated facilities and activities. Over time, the cap will be lowered, thus reducing overall greenhouse gas emissions. The key proposals for Ontario's cap and trade program include:

  • Start date: A proposed start date of January 1, 2017 with a first auctioning of emissions in March 2017.
  • Cap: A cap would be set for each year of the program that would limit the amount of allowable greenhouse gas emissions in tonnes of carbon dioxide equivalent. The cap is proposed to be set at forecast 2017 emissions, declining at a rate to help the province achieve its 2020 reduction target and then ultimately to support Ontario's 2030 and 2050 targets.
  • Coverage: Broad sector coverage is proposed that would capture electricity (including imported electricity), industrial and large commercial activities (e.g. manufacturing, base metal processing, steel, pulp and paper, food processing), institutions, transportation fuel (including propane and fuel oil), distribution of natural gas (e.g. heating fuel). Ontario is considering how the program would cover energy-from-waste facilities.
  • Point of Regulation: The following points of regulation are being proposed for these sectors:
    • Industrial and institutional sources with annual GHG emissions equal to or greater than 25,000 tonnes would be covered at the point of emission (i.e., at the facility).
    • Domestic electricity generation would be covered at the fuel distributor level, and electricity imports at the point the electricity enters the province (first jurisdictional deliverer). Some exceptions may be required for facilities that connect directly to international or inter-provincial natural gas pipelines (these emissions would be covered at electricity generator).
    • Transportation fuels (including fuel oil and propane) would be covered at the distribution level where they are first placed into the market – imports and domestics covered at volumes of 200 litres or more and that are delivered to an Ontario consumer.
    • Distribution of natural gas – For distributors of natural gas that, in aggregate, is associated with annual GHG emissions equal to or greater than 25,000 tonnes, the point of regulation would be at the point the gas is transferred from pipeline into the distribution network for local customers.
  • Emissions Coverage: It is proposed that both fixed process and combustion emissions be covered.
  • New and Expanding Facilities: (1) New facilities that begin operations on January 1, 2016 or later and have annual emissions equal to or greater than 25,000 tonnes per year would have a compliance obligation starting in their third year of operation. (2) Existing facilities that are expanding and whose emissions exceed the compliance threshold of 25,000 tonnes per year would have a compliance obligation starting with the first year the threshold is reached.
  • Program Opt-in: It is proposed that facilities that are obliged to report emissions under Ontario Regulation 452/09, Greenhouse Gas Emissions Reporting, be permitted to opt in to the proposed cap and trade program; firms that opt in would not be permitted to opt out.
  • Market Design Features: It is proposed that Ontario would align its program parameters with those in the Québec-California market, including the auction reserve price and strategic reserve price tiers. The 2015 Annual Auction Reserve Price was set at CAD $12.08 and USD $12.10 in Québec and California respectively.
  • Mitigating Carbon Leakage: It is proposed that a portion of allowances would be distributed free of charge to large emitters with a direct compliance obligation in order to address carbon leakage risk and support their transition to the new cap and trade program. Emissions attributable to electricity generation would not be eligible for free allocations, but emissions due to intensive production of a trade exposed good would be eligible. Facility allocations would be determined according to an equation based on the multiplication of an assistance factor, an emissions benchmark for the facility and a cap adjustment factor. The remainder of the allowances would be sold at auction.
  • Flexibility Mechanisms: Purchasers and covered entities would be allowed to bank allowances, without restrictions on the amount of allowances that may be banked or on how long they may be banked (subject to holding limit).
  • Offsets: Ontario intends to allow the use of offsets for compliance in its program, and to take account of protocols for project types currently accepted in Québec and California. It is proposed that Ontario establish an Offset Credit Registry, issue offset credits for emissions reductions and removals from eligible projects within Canada, allow for the aggregation of projects, recognize offset credits issued by Québec and California, and limit use of offsets to up to 8% of the total compliance obligation.
  • Border Carbon Adjustments: Proposed options include border carbon adjustments for electricity and fuels to level the playing field and reduce leakage. Ontario is also considering the applicability of border carbon adjustments for other sectors that could be covered by the proposed cap and trade program.
  • Recognition of Early Reductions: Ontario is considering whether to recognize early reductions either through product-output benchmarking or early reduction allowances.
  • Enforcement and Penalties: Similar to the Québec and California rules, an entity with excess emissions would be subject to a three-to-one compliance penalty where an additional three allowances for each allowance short at true-up is required, plus the allowance originally owed.

Comments on the cap and trade design proposals are being accepted until December 16, 2015 and may be submitted either by mail to Melissa Ollevier, Senior Policy Advisor at the Ministry of the Environment and Climate Change or online.

To view the original article please click here.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions