Canada: Ontario Introduces Bill To Cancel Cap And Trade And Launches Carbon Tax Case

On July 25, the Honourable Rod Phillips, Minister of Environment, Conservation and Parks (the "Minister"), introduced Bill 4: Cap and Trade Cancellation Act, 2018, (the "Proposed Act"). The Proposed Act will repeal the cap and trade regime enacted under the previous government's Climate Change Mitigation and Low-carbon Economy Act, 2016 (the "CCM Act") and will retire or cancel the various cap and trade instruments (i.e., emissions allowances and offset credits, the "Instruments") currently held by Ontario participants ("Participants") under the cap and trade regime. The Proposed Act was introduced in the wake of then Premier-designate's June 15, 2018 announcement1, that the first act of his newly formed government will be to cancel Ontario's Cap and Trade Program, and the enactment, as of July 3, 2018, O. Reg. 386/18 which terminates the Cap and Trade Program regulation and prohibits Participants from purchasing, selling, trading or otherwise dealing with Instruments.

Under the Proposed Act, a limited group of approximately 250 capped Participants may be entitled to compensation for certain current unused Instruments, on terms which are to be detailed in regulations under the Proposed Act (the "Regulations"). Other Participants, in particular market Participants and holders of 2021 vintage Instruments are not intended to qualify for compensation under the Proposed Act.

Participants should carefully review the expected impacts of the Proposed Act for any Instruments they hold and may wish to assess their options, including possibly making representations to the government concerning the expected impacts of the Proposed Act and/or with respect to the Regulations.

Key Elements of the Proposed Act

Retirement and Cancellation of Instruments

The Proposed Act will repeal the CCM Act and retire or cancel all Instruments held by Participants, including those authorized under the CCM Act and those purchased by Participants through the Ontario-Quebec-California carbon market, which Ontario joined in January 2018. Based on statements made by the Minister at the second reading of the Proposed Act, Instruments corresponding to the greenhouse gas emissions attributed to Participants in respect of the period ending on July 3, 2018 are to be retired, and all other Instruments held by Participants and any undistributed cap and trade instruments will be cancelled.

Limits on Compensation for Instruments and Other Claims

The Proposed Act contemplates that possible claims for compensation for Instruments held by Participants on July 3, 2018 will be resolved under one of three different regimes, with further details to be prescribed in the Regulations.

First, based on statements made by the Minister at the second reading of the Proposed Act, the government expects the costs of Instruments held by Participants which are electricity importers, natural gas distributors, petroleum products suppliers or transmission system operators, to be largely recovered from consumers in the coming months. As a result the Ontario Energy Board should be in a position to remove the carbon cost from its approved rates for natural gas at its next hearing in October, and the cost of gasoline and diesel should be lowered by 4.5 cents and 5.5 cents a litre, respectively, in 2019. Unless otherwise provided by the Regulations, these Participants are not eligible for any form of compensation under the Proposed Act for their Instruments.

Second, with respect to capped Participants (excluding market Participants and those referred to above), the Proposed Act sets out a formula for determining whether any Instruments they hold may qualify for compensation. Subject to the Regulations, the Instruments which may qualify for compensation would equal the number of Instruments held on July 3, 2018 minus: (i) the number of Instruments retired in respect of the period ending on July 3, 2018; (ii) the number of Instruments that were distributed free of charge to the Participant under the CCM Act; and (iii) the number of Instruments having a 2021 vintage year. Since such capped Participants were, in most or all cases, provided with a high percentage of free Instruments, and would likely have retired a significant number of Instruments prior to July 3, 2018, they will be unlikely to qualify for much, if any, compensation under this formula.

Third, with respect to market Participants (non-emitting holders of Instruments), other Participants with Instruments having a 2021 vintage year, or any other person having a claim with respect to cancelled Instruments or otherwise with respect to the repeal of the CCM Act, no compensation or damages may be claimed.

Restrictions on Claims Against the Ontario Government

With the exception of possible claims by capped Participants seeking compensation for unused Instruments (under the regime described above), the Proposed Act purports to bar, among other things: (i) any cause of action arising against the Government of Ontario and related persons as a result of various matters, including, the enactment, operation or administration of the Proposed Act and the retirement or cancellation of cap and trade instruments in accordance with the Proposed Act and (ii) any claims for damages or compensation in respect of the value of cap and trade instruments retired or cancelled by the Proposed Act.

Whether the provisions of the Proposed Act which purport to exclude or limit claims for compensation or damages, or causes of action relating to the Proposed Act or the CCM Act can be successfully challenged under international trade agreements or otherwise remains to be determined.

Targets, Plans and Progress Reports

The Proposed Act requires the Government to establish targets for the reduction of greenhouse gas emissions in Ontario, but does not specify the timeframe within which the targets are to be established and also permits revisions to the targets from time-to-time.

It also requires that the Minister prepare and publish a climate change plan, which may be revised from time-to-time, and report regularly to the public on the climate change plan.

Challenges to Federal Carbon Tax

On August 2, 2018 the Minister and the Attorney General, Caroline Mulroney, announced that the Government of Ontario will challenge the constitutionality of the federal government's carbon tax (applicable in Ontario on January 1, 2019) before the Ontario Court of Appeal. This proceeding is in addition to the previously announced decision to intervene in the Government of Saskatchewan's reference case against the federal carbon tax.

Uncertain Times for Cleantech

The introduction of the Proposed Act, the challenges to the federal carbon tax and other recent developments in the Province of Ontario, including decisions to wind down 758 renewable energy contracts and the various green programs funded by the cap and trade system, have increased the level of uncertainty facing cleantech companies and other companies doing business in the Province. Effective risk assessment and mitigation is particularly critical with respect to businesses and contracts which may be affected by changes to the cap and trade regime or the price of carbon.

Footnote

1. Discussed in Goodmans' Update: Going, Going, Gone – Ontario Premier-Designate Announces Cancellation of Cap and Trade; Pulls Ontario Out of August GHG Auction.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions