Ontario cap and trade program design options

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Action on climate change is heating up in Ontario as the government is poised to make important changes to its environmental framework. These changes are in line with the recent high profile climate change talks on the world stage. Details of the program have now been unveiled. This article briefly outlines the key features and implications of the cap-and-trade program under the Bill and the Draft Regulations.

We provide a review of the proposed design options in our previous bulletin. Following the release of its discussion paper, MOECC solicited comments from the public on the several options it had proposed. The province has also been meeting about cap-and-trade with over stakeholders, including industries, associations, environmental organizations, and labour groups.

The recent release of the Bill and Draft Regulations builds on this momentum by revealing the details of the proposed cap-and-trade program.

The proposed Bill, which is currently in its second reading, aims to establish a framework for climate change-countering action in Ontario. The sectors in which large industrials operate include iron and steel; petroleum refining; cement; hydrogen; beer; ammonia; nitric acid; lime; glass; ceramics; institutions such as universities and colleges; mining; base metal smelting; brick-making; carbon black; ethylene; propylene; magnesium production; mineral wool insulation; lubricants manufacturing; and styrene.

Ontario outlines key aspects of incoming cap-and-trade market | Insights | DLA Piper Global Law Firm

The proposed program commences on January 1, and would function in three-year compliance periods, the first of which would end on December 31, The GHG emissions limit for Capped Emitters would be roughly equivalent to the projected emissions for that year.

Following this, this cap would decline between four and five per cent each year during the first compliance period. Capped Emitters would be required to retire emissions credits in an amount equivalent to their actual emissions for each compliance period.

Ontario Cap-and-Trade Program Design Options Released | Insights | Torys LLP

To achieve compliance, Capped Emitters may therefore:. Under the Draft Regulations, if a Capped Emitter fails to submit all required emissions allowances and credits before the applicable deadline, it will be prohibited from transferring emissions allowances or credits from its holding accounts into any other account other than its compliance account. In addition, the Bill provides that in the event of a shortfall, Capped Emitters will be required to submit additional emissions allowances in an amount equal to three times the shortfall, failing which they may be required to pay an amount equal to any emissions allowances it failed to submit, multiplied by the lowest bid price accepted at the most recent auction.

During the initial compliance period, most large industrial emitters would benefit from a free allocation of emissions credits. This is intended to assist industry members of trade-exposed industrial facilities with high carbon emissions transition into the new model, which the MOECC recognized are more susceptible to competition from international markets.

Electricity generators, transmitters and distributors, natural gas distributors, petroleum product suppliers and certain other emitters cannot qualify for free allocations. Those who do not receive free allowances will have the opportunity to purchase them in auctions run by the MOECC. The types of initiatives that may become eligible for funding are listed in Schedule 1 of the Bill could include those that reduce GHGs through the use of:.

This funding will complement the recently announced Green Investment Fund.

These projects would be undertaken in sectors that are not subject to the cap and would require proponents to demonstrate that the GHG reductions are real, additional, verified, unique, permanent, and enforceable. Once created, emissions offsets will could also be tradable in the secondary market.

Once implemented, this regional market will allow member states to hold joint auctions of emissions allowances and will permit cross-border trading of emissions allowances and offsets.

A cap-and-trade system would create significant implications for businesses throughout the province, including the following:. These implications will have to be considered in the context of an evolving national conversation about climate change.

On March 3, , Prime Minister Justin Trudeau and the provincial premiers agreed to the V ancouver Declaration On Clean Growth And Climate Change. Starting February 25, , the Draft Regulations are available for a 45 day public review and comment period.

Stakeholders should stay alert for the release of the offset regulations, which are expected in the near future. If you are interested in submitting an article to Lexology, please contact Andrew Teague at ateague GlobeBMG. Its certainly more useful than some of the paid services that I have signed up to. We use cookies to customise content for your subscription and for analytics.

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Ontario's cap-and-trade program and competitiveness

Share Facebook Twitter Google Plus Linked In. Follow Please login to follow content. Register now for your free, tailored, daily legal newsfeed service. Ontario to adopt the cap-and-trade model DLA Piper LLP. Canada March 15 What is being proposed The proposed Bill, which is currently in its second reading, aims to establish a framework for climate change-countering action in Ontario.

Caps and options to achieve compliance The proposed program commences on January 1, and would function in three-year compliance periods, the first of which would end on December 31, To achieve compliance, Capped Emitters may therefore: Initial allocation of emissions allowances During the initial compliance period, most large industrial emitters would benefit from a free allocation of emissions credits.

To calculate the free allocation, three factors would be taken into consideration: The types of initiatives that may become eligible for funding are listed in Schedule 1 of the Bill could include those that reduce GHGs through the use of: Implications for businesses A cap-and-trade system would create significant implications for businesses throughout the province, including the following: Capped Emitters will face significant compliance obligations and costs.

They will have to develop strategies for mitigating emissions, obtaining and trading emissions allowances and credits, and hedging against compliance costs. Customers of Capped Emitters could expect increased prices that reflect the new prices of carbon. Innovators may be able to bring to market new emissions reduction technologies and offset projects that were previously uneconomical.

Financial stakeholders will need to understand the implications of the cap-and-trade system for credit and offset trading and carbon finance. New players will likely emerge to facilitate and implement from such transactions.

Ontario to adopt the cap-and-trade model - Lexology

What to expect Starting February 25, , the Draft Regulations are available for a 45 day public review and comment period. DLA Piper LLP - David I. Back to Top RSS feeds Contact Submissions About. Testimonials Cookies Disclaimer Privacy policy. Login Register Follow on Twitter Search.