Canada is turning a new leaf on climate change and this will
have a real impact on consumers and business. Ontario's
cap-and-trade program, expected to launch January 1, 2017, will
require certain emitters to obtain allowances equal to their total
emissions. There is some skepticism around this date. Regardless of
when introduced, carbon pricing (placing a real cost on the
emissions created by business and consumers) is a new reality for
those operating in Ontario and elsewhere in Canada
What does this all mean for you?
The Ontario provincial government is beginning to implement a
program to limit carbon and similar emissions by business.
Over time most businesses will need to consider the financial
burden (and opportunity) presented by the cap-and-trade regime in
Ontario (and similar regimes elsewhere in Canada).
The program begins with the largest emitters and gradually
increases the scope to include most businesses in the Province with
fewer exemptions and ultimately an increased cost.
What is cap-and-trade generally?
In a cap-and-trade program, a government imposes a general limit
(or cap) on the aggregate emissions of covered pollutants and
provides allowances (or credits) to covered businesses and other
entities. Each allowance entitles the holder to emit a certain
amount of the covered pollutants. The allowances can be issued for
free initially or at a cost determined by the program rules or an
agreed auction. The allowances need to be retired at the end of a
compliance period. If a business or entity has more allowances than
needed, it can either trade those to businesses or entities that
need them or opt to bank them for future use. In this way, the
strategic management of emissions can lead a business to hold more
allowances than needed, and thus these allowances can be viewed as
a business asset that may appreciate in value over time. We foresee
the development of a trading market in these credits and the
creation of financial instruments and trading strategies around
Who is covered by the cap-and-trade program?
Participation in the program is either mandatory or voluntary
depending on your level of emissions of carbon dioxide equivalent,
Mandatory participation for emitters of at least 25,000 tonnes
of C02e annually
Voluntary opt-in for emitters of over 10,000 tonnes of
How do you obtain allowances?
For those obligated to participate in the program, allowances
may be acquired in two ways:
Purchased through a public auction process
Acquired through free allocation (available to competitively
sensitive industries only)
What are the expected costs?
It is anticipated that the cost per allowance will be
approximately $14- $18 in 2017 (per the Ontario government's
published estimates). The Ontario government predicts that the
price of allowances is expected to rise to $95 by 2030, which will
equate to annual expenditures of at least $2 million for each
How do you determine your annual emissions?
In preparation for the introduction of the cap-and-trade
program, Ontario has amended the Greenhouse Gas Emissions Reporting
Regulation to require, among other things, emitters
of at least 10,000 tonnes of C02e annually who are
engaged in certain activities to begin reporting their
It is important to note that not all types of emissions are
created equal. Emitters must be careful to implement the
appropriate measurement techniques to properly quantify their
What does this mean for the mining industry?
For the mining industry, the Regulations mandate that entities
engaged in the smelter or refining of certain metals and emit
10,000 C02e or more annually are required to begin
quantifying and reporting their emissions, including businesses
involved in lead, nickel, zinc and copper production (for example).
The Regulations also include a "catch all" provision for
single source emitters of greater than 10,000 tonnes of
C02e annually. The definition is broad enough to capture
all mining sector businesses.
Here are three things you should now be doing?
Measure your Ontario emissions.
Consider whether the greenhouse gas reporting regime applies to
Develop a strategy around the costs and opportunities of cap
and trade to your business (whether or not you are captured in the
first round of the program).
1 To determine a business's total emissions, the
Regulations make use of an impact formula which multiplies each
emission type by its global warming potential, the result of which
means that emitting one tonne of methane (CH4) is equal
to emitting twenty-one tonnes of C02.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
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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