Apr 4, 2017
Cap and Trade
On January 1, 2017, Ontario’s cap-and-trade program came into effect. The cornerstone of the legislation is the Climate Change Mitigation and Low Carbon Economy Act (the Act), which provides a general framework for the program. Central to the Act is the requirement that emitters quantify and report their GHG emissions and submit “allowances” and credits to match the reported emissions at the end of each “compliance period.”
The Act also establishes categories of mandatory, voluntary and market participants and provides the rules for creating and distributing allowances through the allocation of free allowances, auctions and sale processes. An offset program is also available under the Act, injecting flexibility into the scheme by enabling emitters to meet their compliance requirements through emissions reduction, avoidance, or removal. The Act is rounded out by administrative and enforcement provisions, which establish significant penalties for non-compliance.
The Act must be read in conjunction with the related regulations and the documents incorporated by reference in those regulations. These regulations and associated documents set out the substance of Ontario’s cap-and-trade program and include the following:
- Cap and Trade Program Regulation and Methodology for the Distribution of Ontario Emission Allowances Free of Charge: [PDF] establishing the caps for emission allowances over the first compliance period (2017-2020) and the dates for subsequent compliance periods to follow (2021-2023 and each subsequent three-year period). The regulation also sets out the rules relating to registration and participation as a mandatory participant, voluntary participant and market participant. Mandatory participants are facilities that emit over 25,000 tonnes of CO2 in a year; voluntary participants are facilities that emit between 10,000 and 25,000 tonnes of CO2 in a year and choose to opt-in to the program; and market participants are those that choose to trade in the market. Additionally, the regulation governs the establishment and administration of cap-and-trade accounts and provides details on the creation/distribution of emission allowances.
The Act also allows for linkage between Ontario’s cap-and-trade program with programs in other jurisdictions through the Western Climate Initiative. To date, Ontario has committed to connecting its cap-and-trade program with Québec and California, which will enable Ontario to partake in shared auction processes and mutual trading opportunities with these associated jurisdictions, thereby significantly expanding the carbon market. A formal announcement linking Ontario’s program with Québec and California is anticipated in 2017.
Climate Change Action Plan
On June 8, 2016, Ontario released its Climate Change Action Plan [PDF] (the Plan). The Plan sets out specific commitments to meet the province’s near-term 2020 emissions reduction targets. Addressing a broad spectrum of sectors, some of the key components of the Plan include: (i) establishing a “green bank” to assist homeowners and businesses finance energy-efficient technologies; (ii) increasing the availability of zero-emission vehicles and substantially increasing transit; (iii) providing incentives for the installation and retrofit of clean-energy systems; and (iv) implementing new rules and regulations to increase energy efficiency in new buildings.
Coal and Fuel
In conjunction with the province’s procurement of additional renewable energy generation facilitated by the Green Energy Act, the province closed its last remaining coal-fired energy generating plant in 2014, positioning Ontario as the first jurisdiction in North American to completely phase out coal as a source of electricity generation.
Green Energy Act
The province’s 2009 Green Energy Act (the Act) created a series of financial incentives for the development of renewable energy such as wind, solar and biomass, including the creation of a feed-in tariff program. The Energy Conservation and Demand Management Plans regulation under the Act has also established a requirement that public sector agencies routinely develop and update five-year plans for energy conservation.