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Fact sheet - Ontario's Approach to Cap and Trade

Archived Backgrounder

Fact sheet - Ontario's Approach to Cap and Trade

The Model

Cap and trade is one of the most effective strategies we can use to combat climate change, reduce our greenhouse gas (GHG) emissions and help create a green economy.

Proposed amendments to the Environmental Protection Act would put the first steps in motion for a cap-and-trade system in Ontario.

Ontario's leadership in this area -- pursuing partnerships with Quebec, other provinces and U.S. jurisdictions - helps to ensure the province's strong position in an emerging green economy.  We will attract new businesses, stimulate job creation and bolster investments in new greener technology that can be exported around the world.

Currently, industry (including electricity generation) produces 40 per cent of the province's total GHG emissions and needs to do its part in helping Ontario meet the targets set in its Climate Change Action Plan.  The plan calls for GHG emissions to be reduced by six per cent below 1990 levels by 2014, and by 15 percent by 2020.  

Cap and trade would also create a demand for low-carbon technologies, driving innovation, economic growth and new job creation.

As well, Ontario would be well positioned to protect Ontario's interests in negotiations with the federal government and with other jurisdictions when developing a North American cap-and-trade system.

Aligning Ontario's Approach with What is Emerging in North America

Ontario will aim to harmonize its cap-and-trade program with Canadian federal, North American and international approaches.   A broad, common system would maximize Ontario's trading opportunities, ensure a level playing field for our industries and avoid punitive cross-border tariffs. The United States is moving to put a national program in place that could begin as early as 2012.

Ontario will continue to work with its partners in the Western Climate Initiative (WCI), which is playing an important role in the development of a U.S. federal and broader North American cap-and-trade system.  Members include Ontario, Quebec, British Columbia, Manitoba, and seven U.S. states.

Ontario will also work with the Government of Canada to develop a national system that reflects Ontario's interests.  One of the goals of this work will be to avoid duplicate federal and provincial regulations.

The Specifics

Ontario's Environmental Protection Act (EPA) provides the authority to implement a cap-and-trade system.

However, the EPA does not provide specific authority to support certain elements of the cap-and-trade system being considered for Ontario.  The EPA needs to be amended accordingly.
The proposed amendments to the Environmental Protection Act would provide, if passed, the regulatory authority needed to set up a GHG emissions trading system.  This would allow the government to create regulations that would set the rules around such things as allowances, linking to other trading systems and related activities.

While the proposed bill would give the authority to make regulations, the details of the regulations would not be determined until the government has consulted further with industry and stakeholders.  To assist in those talks, a discussion paper has been developed.  

Our first consultation with affected industries and other stakeholders shaped Ontario's approach to cap and trade.  Their input is reflected in the objectives, which include:

  • establishing a reliable "price on carbon" signal, which would help industries plan their growth  
  • enhancing competitiveness of Ontario industries
  • ensuring a level playing field for Ontario businesses
  • encouraging low-cost, absolute GHG reductions
  • avoiding duplication (with potential federal requirements)
  • creating green jobs.

The discussion paper "Moving Forward:  A Greenhouse Gas Cap-and-Trade System For Ontario" -  which is posted on Ontario's Environmental Registry under Registry number 010-6740 - helps clarify the approach being considered in Ontario and the decisions to be made around Ontario's model.  It includes the elements of a cap-and-trade system, gives background on each element according to stakeholder views, and outlines options to be weighed.  Stakeholder discussions and public review will occur over the summer and fall of 2009.

Our path will become clearer as the details of a U.S. federal and Canadian federal system are revealed and stakeholders make their views known this summer.

The Process

The proposed legislation is posted on the Environmental Registry under Registry number 010-6467 for 60 days.  The public is invited to comment.

Ontario's proposed bill must go through final readings and passage before it becomes law.   Second reading would not occur until after the legislature resumes in Fall 2009.

If the proposed amendments are passed, then feedback from stakeholders will shape the regulations that govern cap and trade.  

By mid-2010, government expects to have completed the necessary groundwork to be able to implement cap and trade in 2012.

Background Information