In a bid to provide greater visibility to the public around the
use of proceeds from Ontario's planned cap-and-trade program,
the provincial government
introduced legislation on February 24, 2016 to ensure that such
proceeds are transparently reinvested into green projects and
actions that will reduce greenhouse gas (GHG) emissions.
Under the proposed Climate Change Mitigation and Low Carbon Economy Act
(the Act) all proceeds from Ontario's cap-and-trade program
will be deposited into a new Greenhouse Gas Reduction Account,
which would only fund projects and initiatives aimed at reducing
GHG emissions. To ensure accountability to the public, the
Act would also:
Require an annual report on funds flowing in and out of the
Greenhouse Gas Reduction Account, as well as a description of
supported initiatives and their alignment with climate change
Enshrine Ontario's greenhouse gas reduction targets (15%
below 1990 levels by 2020, 37% below 1990 levels by 2030, and 80%
below 1990 levels by 2050) in law.
Provide a framework for reviewing and increasing emission
reduction targets, as well as establishing additional interim
Require the government to prepare and implement a climate
change action plan for achieving its targets, with progress reports
and a review of the plan at least every five years (the plan
will include timelines, estimated GHG emission reductions from
various initiatives, cost per tonne of reductions, amount of
funding to be drawn from cap-and-trade proceeds, and types of
initiatives that may be funded including those related to energy
use, land use and buildings, infrastructure, transportation,
industry, agriculture and forestry, waste management, education and
training, and research and innovation).
Allow for transitional allowances to large industrial emitters
which would be phased out over a period of time.
Establish a legal framework for the cap-and-trade program,
including provisions for the registration of mandatory and
voluntary participants, administration of cap-and-trade accounts
for program participants, and the administration of emission
allowances and offsets. Further details of the cap-and-trade
program are set out in the draft
Cap and Trade Regulatory Proposal issued on February 25, 2016.
For a more detailed look at the key features of the draft
cap-and-trade regulation, please refer to our overview here.
To facilitate linking, the proposed Act also includes compliance
and enforcement measures for the province's cap-and-trade
program which are aligned with those measures set out in the Quebec
and California cap-and-trade programs. Potential fines for
non-compliance with the act are high, with minimum fines set at
$5,000 and $25,000 and maximums as high as $4M and $6M for
individuals and corporations, respectively, on first convictions.
The Act also allows for the issuance of administrative monetary
penalties, which are similar to the environmental penalties that
can be issued under the Ontario Environmental Protection
Act and the Ontario Water Resources Act.
In designing carbon pricing policies, the question of what to do
with the revenues quickly becomes a heated topic of discussion. For
example, British Columbia's revenue neutral carbon tax was
hotly debated when it was introduced in 2008 and continues to be a
hot topic of discussion today. To assure British Columbians that
carbon tax revenues are properly directed into rebates or
reductions in other taxes, the provincial government implemented a
law to require the carbon tax to be revenue neutral and for the
Minister of Finance to annually prepare a three-year plan for
recycling carbon tax revenues through tax reductions. Ontario's
proposed Act appears to be taking a page from the same book –
by making the government accountable for its actions and ensuring
that the proceeds of the cap-and-trade program are properly
reinvested in green initiatives, the Act aims to bolster the
credibility of the Ontario government's climate change program
among the broader public.
The Act has been posted on the Environmental Bill of Rights
Registry and is open for comment until March 25, 2016 here. We encourage interested parties to
provide comments to the government.
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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