The Province of Ontario unveiled its proposed cap and trade
program in conjunction with the February 24, 2016 Provincial Budget
– describing climate change as "one of the most urgent
issues of our time".
Bill 172, the Climate Change Mitigation and Low-Carbon
Economy Act, 2016 will, if passed, enshrine Ontario's
greenhouse gas ("GHG") emission reduction targets of 15
per cent below 1990 levels by 2020, 37 per cent below 1990 levels
by 2030 and 80 per cent below 1990 levels by 2050. The
program's objective is to facilitate the achievement of these
reduction targets by setting a limit (a cap) on emissions from
industries in four broad categories: large industrial emitters,
certain natural gas distributors, certain petroleum product
suppliers, and certain importers of electricity into Ontario. The
program is structured with three year compliance periods. The first
compliance period is January 1, 2017 to December 31, 2020.
Successive three year compliance periods will follow.
If the bill is enacted, emitters will be required to match their
total actual emissions in each compliance period with an equivalent
amount of "emission allowances" that take the form of
either emission credits or offset credits. Emission credits will be
available for purchase through provincial led auctions or through a
secondary market. Offset credits must meet specific criteria (which
have not yet been published) and will include voluntary, permanent
and verifiable emission reductions outside the capped sectors.
Proposed Reductions in the Cap
In the first year, the number of emission credits made available
will be approximately equal to the expected emissions for that
year. Emission credits will then be reduced by approximately 3 - 4
% each year during the first compliance period.
Who will be Subject to this Program?
Facilities in sectors including: iron
and steel, petroleum refining, cement, beer, glass, institutions
(primarily hospitals and education facilities), mining, base metal
smelting, brick making, and natural gas distributors provided the
facilities emit at least 25,000 tonnes of GHG annually.
Most petroleum suppliers because the
threshold for inclusion is very low (200 litres or more supplied
Limited Transition Mechanisms
Large industrial emitters are to receive free emission credits
from the Province during the first three years to assist with
transition. New facilities will not be subject to the cap until
their third year of operations.
It is proposed that all auction revenue, currently estimated at
$1.9 billion annually, would be paid into a "Greenhouse Gas
Reduction Account" and used to fund GHG reduction initiatives.
Further detail regarding these initiatives is expected in the
Province's 2016 Climate Change Strategy and Action Plan.
Bill 172 is subject to public comment until March 25, 2016. The
draft regulation is subject to public comment until April 10,
1 The full list of large industrial emitters includes
facilities in the following sectors: iron and steel, petroleum
refining, cement, hydrogen, beer, ammonia, nitric acid, lime,
glass, institutions, mining, base metal smelting, brick making,
carbon black, ethylene, magnesium production, mineral wool
insulation, lubricant manufacturing and styrene.
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