On May 27, 2009, the Government of Ontario introduced
legislation to enable the creation of a "cap-and-trade"
system in the province. If passed, Bill 185 - the full name of
which is the Environmental Protection Amendment Act (Greenhouse
Gas Emissions Trading), 2009 - would amend existing
legislation to establish a system with hard caps on the absolute
level of permitted emissions. This is expected to help the province
meet its commitment to reduce greenhouse gas (GHG) emissions to 6%
below 1990 levels by 2015 and 15% by 2020.
In developing Bill 185, the Government has consulted with
environmental groups, as well as with nine industrial sectors
expected to be involved in cap-and-trade that collectively
represent approximately 40% of Ontario's total 2007
emissions1. While the Bill sketches the broad outlines
of the province's commitment to cap-and-trade as a strategy in
the fight against climate change, much of the detail of the
province's plan is still to be worked out in forthcoming
regulations. To this end, the Government has produced a discussion
paper that presents design issues and options for the key elements
of a cap-and-trade system. It is seeking stakeholder comments to be
used in the development of the proposed regulations. The discussion
paper has been posted on the Environmental Registry for a
60-day public comment period ending July 26,
Key elements of Bill 185
Ontario's Environmental Protection Act (EPA)
provides the Government with broad authority to implement emissions
trading systems for contaminants (authority that has previously
been used to establish cap-and-trade programs for nitrogen oxides
and sulphur dioxide). In providing for the development of a GHG
cap-and-trade system, Bill 185 deals with a number of key issues,
Greenhouse gases: the Bill adds a definition of GHGs
to the EPA, adding within its purview of contaminants gases
including carbon dioxide, methane, and nitrous oxide.
Market-based approaches: the Bill sets forth
regulation-making powers with respect to establishing the scope of
a cap-and-trade system, the persons and facilities to which such
system would apply as well as monitoring and reporting
Allowances and credits: the Bill includes
regulation-making power with respect to the establishment of
allowances and offset credits and well as the distribution, use,
trading and retirement of such credits.
Regional linkages: the Bill explicitly contemplates
integration with other cap-and-trade systems, and further notes in
its preamble that such linkages can provide emissions reductions at
a lower cost, while improving the pace of innovation and allowing
for larger trading volumes and improved liquidity. Significant
action on this front has already been taken. In June 2008, the
Governments of Ontario and Quebec signed a Memorandum of
Understanding to collaborate on a GHG cap-and-trade initiative,
while in July 2008, Ontario joined the Western Climate Initiative
(WCI), a multi-sector trading program which includes British
Columbia, Quebec and Manitoba and seven U.S. states. As noted
below, it is also possible that Ontario would link to a future
North America-wide trading system if and when such a system is
Bill 185 leaves numerous regulatory details to be determined,
including whether allowances will be auctioned, sold or distributed
free of charge, as well as the exact nature of the emission caps
and to whom the legislation would apply. As noted above, the
province has posted a discussion paper which incorporates feedback
received from stakeholders to date, and is seeking further public
comment until July 26, 2009 as it develops proposed
Ontario would be the third province to adopt a GHG cap-and-trade
system, after British Columbia and Quebec. On May 12, 2009, Quebec
introduced Bill 42 to create a cap-and-trade system in the
province. Ontario Premier McGuinty recently commented that Ontario
and Quebec have a responsibility to "put in place a
carbon-exchange register" that will "serve as kind of a
pilot project" in other jurisdictions. The manner in which
these two jurisdictions plan to harmonize their approaches is
something else to look out for in the coming months.
Finally, the province anticipates that a North American
cap-and-trade plan could be in place as early as 2012 - another
development that will undoubtedly be the subject of future
1Government of Ontario, news release, "Helping the Economy and the
Environment - McGuinty Government Introduces Enabling Cap-and-Trade
Legislation" (May 27, 2009),
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