Cap and trade program design options ontario
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 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. 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 and natural gas distributors would still have to purchase their allowances beginning in Banking allowances - To further mitigate potential compliance costs of the new regime, MOECC 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.