Ontario has forged ahead with its plans to introduce a Cap and
Trade System, with the announcement of the Climate Change
Mitigation and Low-carbon Economy Act, 2016 (the
"Act") and the associated draft Cap and Trade Regulation
The Act and Regulation outline the details of Ontario's
proposed plan to reduce greenhouse gas ("GHG")
The Cap and Trade System under the Act and Regulation is
consistent with the Cap and Trade program design proposal posted on
the Environmental Registry in November
Proposed Cap and Trade System
Facilities will be required to comply with the Cap and Trade
System as of January 1, 2017. The first compliance period will run
from 2017 to 2020. Emission allowances will be auctioned four times
a year. Available emission allowances will decrease
Large emitters will benefit from the distribution of free
allowances to help initially offset the cost of the Cap and Trade
System. The number of free allowances available for large emitters
will decrease over time.
As previously suggested, the Cap and Trade System will apply to
GHG emissions from:
electricity generation and importation
natural gas distribution
petroleum product supply
regulated industrial and large commercial facilities (e.g.
manufacturing, base metal processing, steel, pulp and paper, food
processing)2 that emit greater than or equal to
25,000 tonnes of carbon dioxide equivalent
("CO2e") per year.
The Cap and Trade System will align with the systems operating
in California and Quebec.
If a facility exceeds its cap and fails to purchase sufficient
credits or offsets, the facility will be subject to a three-to-one
allowance penalty. The facility will have to submit an additional
three allowances for every one allowance over the cap in order to
get into compliance.
Non-compliance can also result in prosecutions, administrative
monetary penalties, and/or Ministry of the Environment and Climate
Change ("MOECC") Orders.
Greenhouse Gas Reduction Account
All proceeds from the Cap and Trade System will go into a
Greenhouse Gas Reduction Account. Funds from this Account will be
used to exclusively support projects and initiatives to reduce GHG
emissions in Ontario.
The Future of Offsets
Ontario has not yet proposed an offset regulation. A separate
offset regulation will be proposed once the Act is passed by the
We expect that the use of offset credits will be limited to a
maximum of 8% of a facility's compliance obligations. The MOECC
has previously suggested that offset projects may include:
mine methane capture and destruction
landfill gas capture and destruction
ozone depleting substances capture and destruction.
The MOECC is seeking input from stakeholders and the public on
the proposed legislation. The public comment period is open until
March 24, 2016 for the Act and April 10, 2016 for the
1 Our summary of the November 2015 design proposal
can be found
2 O Reg 452/09, Table 2.
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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