Cap and trade program design options ontario


Much of the new strategy will be fleshed out in new climate change legislation and a new five-year action plan will be introduced in early This bulletin reviews the cap-and-trade design options being proposed in the Discussion Paper, which is expected to be reflected in a draft regulatory proposal to be tabled in cap and trade program design options ontario To achieve this goal, the Discussion Paper proposes two approaches: First, large industrial or institutional sources of annual GHG emissions equal or greater than 25, tonnes would be covered downstream at the point of emissions i.

Over facilities in Ontario would be covered under this proposed threshold. It is further proposed that any new industrial or distributor facilities that begin operations after January 1, will be given a two-year grace period before they are required to comply with the cap-and-trade program. In addition to laying out the high-level aspects cap and trade program design options ontario the cap-and-trade market, the Discussion Paper proposed a number of more detailed market design features that will be crucial to any future participants in the market.

Below are some of the most important proposed features:. As mentioned above, early promises to be a busy time for MOECC with the stated intention to introduce new provincial climate change legislation, a five-year action plan and a regulatory proposal based on feedback from the Discussion Paper. Currently, Canada has a patch-work of climate regulations with Ontario and Quebec participating in their own carbon market with California and BC and, recently, Alberta, preferring the carbon tax route to achieving their emissions reductions targets.

Key market design features In addition to laying out the high-level aspects of the cap-and-trade market, the Discussion Paper proposed a number of more detailed market design features that will be crucial to any future participants in the market.

Below are some of the most important proposed features: However, the EITE concern only applies to the industrial sector, so electricity, transportation fuel cap and trade program design options ontario natural gas distributors would still have to purchase their allowances beginning in Banking allowances - To further mitigate potential compliance costs of the new regime, Cap and trade program design options ontario proposes that covered entities will be permitted to bank allowances over time so unused allowances in one compliance period may be used or traded in subsequent periods.

Offsets - MOECC plans to allow the use of offset credits using Ontario-approved offset protocols, which are still under development. MOECC proposes a further ten project types will be subject to a more intensive protocol review process. Comment period on Discussion Paper now open As mentioned above, early promises to be a busy time for MOECC with the stated intention to introduce new provincial climate change legislation, a five-year action plan and a regulatory proposal based on feedback from the Discussion Paper.

One other area to watch out for is the possibility of border adjustments whereby the federal government could introduce new tariffs or taxes on imports from countries without carbon pricing schemes to help level the playing-field from EITE industries. How such tariffs could work with current and proposed free trade agreements will likely be a key policy debate in Related services Climate Change Environment.

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 cap and trade program design options ontario 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. Scope of cap-and-trade obligations. The sectors in which large industrials operate include iron and steel; cap and trade program design options ontario 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.

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 cap and trade program design options ontario period. Capped Emitters would be required to retire emissions credits in an amount equivalent to their actual emissions for each compliance period. 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 cap and trade program design options ontario 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 cap and trade program design options ontario 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.

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 have any questions about this bulletin or if you would like further information about these matters, please contact the authors. 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 Cap and trade program design options ontario 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. What to expect Starting February 25,the Draft Regulations are available for a 45 day public review and comment period.

Related services Environment Climate Change.