Canada: Ontario Announces Proposed Greenhouse Gas Cap And Trade System

On May 27, 2009, Ontario introduced legislation to aid in implementation of a provincial greenhouse gas (GHG) cap and trade system, and released another discussion paper about the design of such a system. Followings similar legislative initiatives in the provinces of British Columbia and Québec, the proposed amendments would enable the province to pass discretionary regulations for the establishment and administration of a cap and trade system. Although deemed a step in the right direction by many, neither the legislation nor the discussion paper includes any substantive commitments about the probable structure of the proposed system.

The Ontario Government

The intention to implement a cap and trade system is not new to the province of Ontario. In June 2008, the province signed a Memorandum of Understanding (MOU) supporting a provincial-territorial cap and trade initiative with Québec. The agreement called for collaboration on the development of a trading system and indicated both provinces' desire to reach implementation "as early as January 1, 2010." Prior to the MOU, Ontario had set a provincial target to reduce absolute (as opposed to intensity-based) GHG emissions to 6 percent below 1990 levels by 2014 and 15 percent below such levels by 2020.

Ontario demonstrated its further commitment to a cap and trade system by joining the Western Climate Initiative (WCI) in July 2008. Partners to that agreement include British Columbia, Manitoba, Québec and several American states. The WCI was created to evaluate and implement a cooperative regional market-based cap and trade system. WCI members have committed to lowering their emission rates to 15 percent below 2005 levels by 2020.

Bill 185: Environmental Protection Amendment Act

The Ontario government introduced Bill 185, the Environmental Protection Amendment Act on May 27, 2009. The Bill, which has received First Reading, would amend the Environmental Protection Act through the addition of broad provisions enabling the passage of regulations to establish and regulate a GHG cap and trade program, and to establish rules relating to the scope, trading, distribution and administration of such program. The proposed amendments do not provide the details or structure for the proposed system.

The amendments were released in conjunction with a discussion paper, providing for a 60-day comment on the Ontario Environmental Registry, titled "Moving Forward: A Greenhouse Gas Cap-and-Trade System for Ontario." The discussion paper suggests alternative approaches for crucial elements of the system and requests comments on the alternatives for establishing caps and baselines, scope, thresholds and phasing in, allowance distribution (allocation/auction), incentives for early action, offsets, reporting and transition. It indicates the Province's strong preference to move forward in conjunction with regional, North American and international initiatives to promote a harmonized system.

The discussion paper specifies 2012 as the implementation date for the Provincial cap-and trade system, which is two years later than the 2010 date proposed under the Ontario-Québec MOU. This aligns the proposed Ontario cap and trade system with the WCI, which has a target start date of 2012.

The Ontario Ministry of Environment has indicated that discussion has occurred with the nine industrial sectors likely to be regulated under the Ontario cap and trade system: base metal, cement, chemical, electricity, lime, natural gas, petroleum, pulp and paper, and steel. The Province asserts that these sectors represented about 40% of Ontario's total estimated emissions in 2007. Supporting the appropriateness of the legislation, the Ministry asserts that the cap and trade system will "create a demand for low-carbon technologies, driving innovation, economic growth, and new job creation." By passing the enabling amendments, Ontario intends to position itself to protect provincial interests in negotiations with both the federal government and other jurisdictions in any future development of a North American cap-and-trade system.

The Proposed American Clean Energy and Security Act of 2009

Ontario's decision to defer implementation of the proposed legislation to 2012 may have been influenced by current developments in the United States. The proposed American Clean Energy and Security Act of 2009 (a.k.a. the Waxman-Markey Bill) was released as a discussion draft on March 31, 2009. The Waxman-Markey Bill included a proposed cap and trade system that would freely distribute 85 percent of its initial carbon permits, leaving 15 percent to be auctioned. Careful to avoid any interpretation as a "tax" in the current economic downturn, this bill seeks to protect electricity distributors by allotting them the largest share of free permits. This approach is intended to protect consumers, sheltering them from energy rate spikes through the free distribution of emission permits to their local distributors in the formative years of the system.

The Waxman-Markey Bill has been approved (33-25) by the U.S. House Energy and Commerce Committee but still has significant steps to complete before becoming law. It remains subject to review by at least eight other House committees and consideration by members of the U.S. House of Representatives and Senate. If this bill is ultimately adopted, there will almost certainly be significant changes made at each step of the process. The Waxman-Markey Bill does appear to indicate a strong American drive to be at the forefront of the formation of a cap and trade system, and any harmonized system that may emerge.


Both the WCI and the proposed Waxman-Markey Bill address the primary greenhouse gases which are specified under the Kyoto Protocol and addressed by the proposed amendments under Ontario's Bill 185. This will allow for consistency across the emerging systems should harmonization occur. However, the WCI and Waxman-Markey approaches do differ (including with regard to timing and point of regulation) and such differences will have to be resolved if the systems are to be compatible. To provide uniformity with emerging systems, the Ontario government has indicated that it will likely ultimately include a broad spectrum of sectors within the provincial system, including electricity, industrial, transportation, residential, commercial and institutional sectors. The Ontario government's proposed amendments are intended to provide the province with a platform and a seat at the table in any future negotiations with provincial, federal, international and non-governmental stakeholders in the development of a harmonized cap and trade system. The Ontario government has indicated that frustration with Ottawa's and Washington's previous failure to make significant progress on the Climate Change issue has driven it to take the reins in setting up a provincial cap and trade system.

The timing of this legislation may provide the provincial government some advantage when collaborating with other stakeholders. Ontario hopes for a common system with other jurisdictions that will maximize trade opportunities, ensure a level playing field for industry and avoid punitive cross-border tariffs. The effectiveness of any Ontario or Canadian cap and trade system will hinge on harmonization across borders which would permit a broad-based market for GHG credits. With the U.S. system being the "elephant" in the room, the reality is likely to be that whatever GHG system is adopted in the U.S. will dictate the substance of the Ontario and Canadian systems, whether or not it is fully consistent with the system design that would otherwise be adopted by the Ontario and Federal Governments. It remains to be seen whether the proposed Waxman-Markey Bill is necessary (or will be successful in providing the tipping point) to begin the process toward a North American (or even global) harmonized GHG cap and trade system.

Dan Kirby is a partner and Co-Chair in the firm's Environmental Law Group. Jack Coop is a partner in the Litigation Department in the firm's Toronto office. The focus of his practice is environmental litigation. Jacob Sadikman is an associate in the Business Law Department in the firm's Toronto office. Lia Bruschetta has completed her second year of the LL.B. program at Dalhousie University.

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
Check to state you have read and
agree to our Terms and Conditions

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.

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 by clicking here .

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.


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.