Yesterday, the provincial government released its 2016 Ontario
Budget and with it came the details of their much anticipated
cap-and-trade plan. The plan, which will be governed by the
Climate Change Mitigation and Low Carbon Economy
Act, will be linked to existing cap-and-trade
systems in Quebec and California under the Western Climate
Initiative. The provincial government anticipates that the
cap-and-trade plan will cover a broad range of industries, which,
in aggregate, account for nearly 82 per cent of the province's
total emissions. The plan is expected to generate proceeds in
excess of $1.8 billion through the sale of carbon allowances and is
intended to do most of the heavy lifting necessary to enable
Ontario meet its greenhouse gas reduction target of 37% below 1990
levels by 2030.
Details of the cap-and-trade plan can be parceled into three
primary sections: the plan itself; the cost of the plan; and
investment of the proceeds.
Under the plan, the province will set a cap on emissions
beginning in 2017. The cap equates to the total number of carbon
allowances that will be sold by the government, with one allowance
being equal to one tonne of greenhouse gas emissions. Emitters are
expected to purchase sufficient credits to cover their emissions in
a given year. In an effort to prevent carbon leakage, the plan
allows for free credit allocation to competitively sensitive
industries until the end of the first compliance review period in
2020. The plan also allows for emitters to take advantage of
additional compliance measures, including offset credits gained
through emissions reduction in excluded sectors, such as
agriculture, and a one-time allocation credit award for first
The plan includes a framework for reviewing and increasing
targets and also stipulates that the government is required to
prepare and implement a climate change action plan for achieving
these targets, with progress reports and a review of the plan every
The expected costs, reflected in the chart below, will be born
primarily by consumers through increased gasoline and heating
A major criticism has been that the cap-and-trade plan forces
consumers, rather than large emitters, to pay increased costs,
while doing little to actually reduce emissions. However, the
provincial government insists that the funds generated by the plan
will be designated towards investments that will, among other
things, increase energy efficiency, with the effect of lowing total
costs over the medium to long term.
Investment of the Proceeds
The proceeds generated by the plan will be invested in
"green" initiatives, which are aimed at reducing
emissions and generating sustainable economic growth. The
government has suggested that such initiatives include:
investment in renewables;
infrastructure to support zero-emission transportation
investment in public transit; and
funding for research and development into low-carbon
In an effort to improve transparency and public perception, the
plan contains disclosure obligations regarding how the funds
generated through the cap-and-trade program are spent and how such
spending aligns with the provincial government's dynamic
climate change goals.
In conjunction with the announcement, the provincial government
has also published the Cap and Trade Regulatory Proposal
and the Revised Guideline for Greenhouse Gas Emissions
Reporting, which set out the framework of the cap-and-trade
system and contain detailed provisions governing credit allocation,
implementation guidelines, market and compliance rules, reporting
obligations for emitters and enforcement measures. Accordingly, we
are reviewing these regulations and will provide a more detailed
analysis in the days that follow.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market, composed of its generators, transmitters, distributors, retailers, electricity consumers and wholesale electricity market.
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