Canada: New Ontario PC Government Moves To End Cap And Trade Without Stakeholder Input

Last Updated: August 22 2018
Article by Burgandy Dunn and Rizwan Khan​

With the proposed repeal of the Climate Change Mitigation and Low-Carbon Economy Act, 2016 and its regulations (Greenhouse Gas Emissions Quantification, Reporting, and Verification regulation (O. Reg. 143/16)) the Ontario government has committed to ending the cap and trade program in Ontario. Bill 4, Cap and Trade Cancellation Act, 2018 was introduced into the Ontario Legislature on July 25, 2018. Bill 4, if passed, will repeal the Climate Change Mitigation and Low-carbon Economy Act, 2016 and wind down the Cap and Trade Program.

On July 25, 2018 The Greenhouse Gas Emissions: Quantification, Reporting, and Verification regulation (O. Reg. 390/18) was filed under the Environmental Protection Act, 1990. The incorporated Guideline was also updated. O. Reg. 390/18 incorporates regulatory requirements that existed under the repealed O. Reg 143/16 and makes a number of changes, including revising the Greenhouse Gas (GHG) emission reporting requirements for capped participants, as part of the wind down of the cap and trade program, by restricting the reporting period to July 3, 2018. More specifically, the new reporting requirements require that capped participants provide, no later than October 1, 2018, a report (and verification statement by an accredited verification body) containing information set out in Schedule 6 to the Regulations to the Director with respect to the specified GHG activities engaged in at a facility, and the electricity importation, natural gas distribution or petroleum product supply, for the period beginning on January 1, 2018 and ending on July 3, 2018.

The reporting requirements apply to persons (a) required under section 4 of Ontario Regulation 143/16 to quantify the amount of greenhouse gas emitted during all specified GHG activities at a facility; and (b) required under section 12 of Ontario Regulation 143/16 to calculate greenhouse gas emissions associated with an activity. The GHG emissions reported through this regulation will be used to determine the number of cap and trade instruments to be retired for the participants under the wind-down of the cap and trade program. O. Reg. 390/18 will come into force on August 1, 2018.

Note that a public comment period was not provided under the Environmental Bill of Rights for this regulatory change. Notice of the decision was provided on the Environmental Bill of Rights (EBR) Environmental Registry on July 26, 2018 (EBR Registry No. 013-3382). Likewise, earlier this month, the new Ontario Ministry of the Environment, Conservation and Parks used EBR section 30(1) to exempt the regulatory proposal to repeal the Cap and Trade Program regulation (O. Reg. 144/16) and file O. Reg. 386/18: Prohibition against the Purchase, Sale and Other Dealings with Emission Allowances and Credits. Instead the Ministry posted a notice of the proposed regulatory change pursuant to section 30(2) of the Environmental Bill of Rights, 1993 which requires notice of the use of the exception in section 30(1). Note that O. Reg 386/18 provides that no registered participant shall, on and after the day the coming into force of the Regulation on July 3, 2018, purchase, sell, trade or otherwise deal with emission allowances and credits.

Sections 15, 16 and 22 of the Environmental Bill of Rights, 1993 require the Minister to do everything in his or her power to give at least thirty days notice to the public of Acts, regulations, policies, and instruments which, could, if implemented, have a significant effect on the environment. Exceptions to this public notice requirement are laid out under section 30. Subsection 30 (1) provides that the public notice requirements laid out in Sections 15, 16 and 22 do not apply where, in the minister's opinion, the environmentally significant aspects of a proposal for a policy, Act, regulation or instrument, have already been considered in a process of public participation, under this Act, under another Act or otherwise, that was substantially equivalent to the process required in relation to the proposal under this Act; or
are required to be considered in a process of public participation under another Act that is substantially equivalent to the process required in relation to the proposal under this Act. Subsection 30 (2) requires the Minister to give notice of the decision to the public and to the Environmental Commissioner of the decision to utilize the section 30 (1) Exception. Subsection (3) requires that the Minister provide the Notice "as soon as reasonably possible after the decision is made" and include a brief statement of the minister's reasons for the decision and any other information about the decision that the minister considers appropriate.

According to a search of the online EBR Environmental Registry, there are only four instances where prescribed ministries have employed the section 30 exception. In all but the July 26, 2018 use of the exception had the environmentally significant aspects of the proposal already been considered in a process of public participation under the EBR (EBR Registry Nos. 012-8561, 013-1591) or another Act that was substantially equivalent to the process required under the EBR (EBR Registry No. 013-2421). EBR Registry No. 013-3382's use of the exception is unprecedented. The rationale given for the use of this rarely applied exception is that the Minister was of the opinion that the recent Ontario election was a process of public participation that was substantially equivalent to the process required under the EBR and that the environmentally significant aspects of the regulation were considered during that process because the government made a clear election platform commitment to end the cap and trade program. Based on our research, the electoral process has not previously been seen as an appropriate stand-in for the right to public participation in environmental decision-making for the purposes of the section 30(1) exception under the EBR.

O. Reg. 386/18: Prohibition against the Purchase, Sale and Other Dealings with Emission Allowances and Credits was filed on July 3, 2018, and the EBR Registry Information Notice was posted July 6, 2018 (EBR Registry No. 013-3221).

On July 18, 2018, the Canadian Environmental Law Association filed a request for review of Ontario Regulation 386/18: Prohibition against the Purchase, Sale and other Dealings with Emission Allowances and Credits under Part IV of Ontario's Environmental Bill of Rights. The Application for Review is based on the following grounds:

  1. The Regulation was not subject to public notice and comment under the EBR and the Minister did not consider the public's comments prior to its passage, which is in direct contravention of the mandatory duties imposed under Part II of the EBR in relation to public participation.
  2. As a matter of law, the Minister's decision not to post the Regulation on the Environmental Registry for public comment cannot be justified under any of the statutory exceptions to public participation under the EBR.
  3. The Regulation's immediate termination of the province's cap-and-trade program is contrary to the public interest and may cause or contribute to significant harm to the environment and human health and safety, particularly since the provincial government has not announced any alternative programs that will be undertaken in order to reduce greenhouse gas emissions and transition Ontario to a resilient low-carbon economy.

CELA's Request for Review states that, in order to comply with Part II of the EBR, the Ontario government must immediately revoke Regulation 386/18, provide an appropriate opportunity for public comment by posting a notice on the Environmental Registry in relation to any future regulatory proposals under the Act, and consider the public's comments before making any decision about the future of the cap-and-trade program.

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