Canada: Ontario Introduces New Cap And Trade Legislation


On May 27, 2009 the Government of Ontario introduced Bill 185, the Environmental Protection Amendment Act (Greenhouse Gas Emissions Trading), 2009 ("Bill 185"), a set of amendments to the Environmental Protection Act that, if passed, will enable a government authority to implement a provincial cap and trade system for greenhouse gas (GHG) emissions. The Ontario Government is also seeking comments on a discussion paper entitled "Moving Forward: A Greenhouse Gas Cap-and-Trade System for Ontario" ("Moving Forward") that explores possible options for the structure and design of the proposed system.

An Integrated Cap And Trade System

Within the larger context of the 2007 Ontario Climate Change Action Plan, which set GHG emissions reductions goals for the province, Bill 185 builds on Ontario's previous commitments to develop a cap and trade system that is integrated with other North American jurisdictions. In June 2008, Ontario and Quebec entered into a Memorandum of Understanding which stated an intent to create a cap and trade system. The following month, Ontario joined the Western Climate Initiative ("WCI"), a regional partnership which endorses cap and trade and includes seven U.S. states, Quebec, British Columbia, and Manitoba. Bill 185 is the next step in the progress towards a cap and trade regime in Ontario.

Key Features Of The Bill

  • Included GHGs: The proposed legislation will apply to all 6 GHGs (carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulphur hexafluoride).
  • Interaction With Other Jurisdictions: The regulatory authority's power to make regulations includes the power to link Ontario's cap and trade system with other jurisdictions and to govern the use and trading of foreign allowances within the province.
  • Auctions: The government will be able to auction or sell allowances and offsets.
  • Delegation: The government will be able to delegate its authority to regulate the provincial cap and trade system.

"Moving Forward": Designing Ontario's GHG Emissions Trading System

In Moving Forward, the Government of Ontario outlines policy issues and options to implement the future cap and trade system. Informed by consultation with stakeholders, a key theme of Moving Forward is the government's desire to harmonize the Ontario system with other emerging systems, particularly in North America. The discussion paper focuses on transitional assistance in the short term and investment in green technology in the long term. Specific options being considered are discussed below.

Caps And Baselines

Moving Forward indicates that the Ontario Government is still in the process of deciding between the following two options with respect to caps and baselines:

  • Use forecasted emissions levels to 2012, with a reduction target of 15% economy-wide by 2020; or
  • Use 2005 as the baseline, with reduction targets of 3% by 2012, 17% by 2020 for industry and fuels, 42% by 2030 and 80% by 2050.

It has also not yet been determined whether the baseline should be the 3-year average emissions between 2005-2007 or the 5-year average emissions between 2003-2007.

Scope And Thresholds

Stakeholders in Ontario have generally indicated the need for a cap and trade system to be as broad as possible in its coverage and to have consistent thresholds across regulated sectors.

Although the government foresees coverage of the electricity, industrial, transportation, residential, commercial and institutional sectors, it is entertaining two potential timelines for inclusion:

  • initial inclusion of electricity generation and imports, large industrial and commercial combustion sources and industrial process emissions, followed by inclusion at a later date of residential, commercial and industrial fuel combustion and transportation fuel combustion; or
  • initial inclusion of all electricity generation, natural gas liquid, petroleum and coal-based liquid fuel producers/importers emitting more than 25kt/yr, followed by industrial sources emitting more than 25 kt/yr, in turn followed by natural gas distribution.

Cap Setting And Allocation

Allowance allocation and means of auctioning are issues which have generated a wide variety of views from stakeholders. Industry stakeholders had indicated their preference to receive gratis (free) allowances. Other stakeholders focused on the need for higher levels of auctioning for the electricity sectors.

In Moving Forward, the approach which is currently emerging is an allocation model that uses higher levels of auctioning for distributing allowances to electricity generators, with higher levels of gratis allowances and lower levels of auctioning proposed for energy-intensive and trade-exposed industries. This approach would ultimately be phased out when full auctioning could be implemented more broadly over the longer term. Allocations to other sectors will require further clarification.

The province has also indicated the use of a sector-wide benchmark to determine allocations so as to offer a competitive advantage to facilities that took early action to reduce emissions before the system's implementation. This approach marks a departure from the EU-ETS approach which is based on reductions from historical emissions or reductions from forecasted levels.

A host of issues regarding allocation principles and the formation of an auction system remain outstanding, including: whether the electricity sector should be subject to full auctioning from the outset of a cap and trade system; whether there should be floors or ceilings and/or reserve prices for auctions and offsets; to what purposes auction revenues should be put; what to do with unsold allowances; and how to develop benchmarks for gratis allowances.

Credit For Early Action

The Ontario Government supports providing incentives and rewarding emissions reductions that occur prior to the system's start date. However, further comment is required with respect to how to provide such rewards and incentives. The Ontario Government has considered issuing early reduction allowances or credits that could be used like other allowances as well as auctioning allowances and offsets. The government has also considered using industry benchmarks to determine gratis allocations so those who have already reduced emissions below the benchmarks will be able to make unused allowances available for sale. Stakeholders have called for simple and clear criteria to assist proponents.


Many stakeholders have expressed a strong interest for Ontario to establish an offsets program, and industry has indicated that offsets should be available as a compliance alternative. A technical experts group was established to advise Ontario on rules for a potential offsets system in response to the strong stakeholder interest in offsets. However, it remains to be seen whether the proposed offset system will be overseen by the government directly, by a government agency or by a public-private partnership. In addition, it is not yet clear what types of projects will be eligible to obtain offsets, whether and how Ontario should recognize offsets from other jurisdictions, and how to best assess a project's additionality and permanence, among many other issues.


Stakeholders have expressed an interest in an effective and efficient reporting system which is also capable of being linked with other systems, such as any reporting system required by the Federal Government. Many industries indicated a preference for an audit approach to verify data rather than third party verification. Smaller companies emphasized the need that administrative requirements be manageable. Concerns were also raised with respect to the protection of confidential information.

Moving Forward states that it is Ontario's intention to harmonize its reporting process with the Federal Government and the U.S. to avoid duplicate regulatory requirements. However, the details of how to achieve an efficient yet effective reporting system have not yet been developed.

The Ontario Government is considering WCI's three-year verification cycle (full verification in the first year and less intense verification in the next two) and the use of voluntary (i.e. non-verified) reporting requirements for emissions between 10 kt/yr and 25 kt/yr. In addition, the province is considering how electronic reporting infrastructure might be integrated with other provincial reporting requirements.

Industry Transition

It is widely understood that the transition to a cap and trade system will require new green technologies. At this time, the government has not decided which of the specific emissions reduction technologies to focus on. Stakeholders have identified technology deployment, research and innovation and accelerated investment, among other things, as key to a transition to a cap and trade system. The province is seeking feedback on who should coordinate the technology and transition – existing government programs, a new government-led body, or the private sector – and where the funding should come from – existing government support programs, auction revenues, or a new technology fund.

What's Next

Bill 185 and Moving Forward are currently subject to public comment which closes on July 26, 2009. However, given that summer is rapidly approaching, Bill 185 may not receive second reading before Fall 2009. Although significant progress towards a cap and trade system has been made with the introduction of Bill 185 and the posting of Moving Forward, a great deal of work remains to be done. This is especially the case since the Government of Ontario is seeking to implement the proposed cap and trade system by 2012 in order to coincide with the expected start date for the U.S. cap and trade system.

About BLG

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

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

In association with
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

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