Ontario unveils Cap and Trade program


As part of the 2016 provincial budget, Ontario has unveiled its Cap and Trade program to limit greenhouse gas emissions (GHGs) and meet its emissions target of 15 per cent below 1990 levels by 2020.

“Climate change is already costing the people of Ontario—it has devastated communities, damaged homes, businesses and crops, and increased insurance rates. Ontario is leading the fight against climate change, and that means transforming how we live, move, and work,” stated Minister of the Environment and Climate Change, Glen Murray, in a Feb. 25 press release.

What is Cap and Trade?

Under the Cap and Trade program, the province would set a cap on GHGs for each year of the first compliance period (2017-2020). The cap is like an emission allowance, where one allowance covers one tonne of emissions.

Cap and Trade would affect everyone in the province, but would have the largest impact on industries, institutions, and electricity generators and distributors that produce over 25,000 tonnes of GHGs per year. They would have to buy allowances for their emissions if they exceed the cap.

To facilitate compliance, covered sectors could also fund emissions reductions in non-covered sectors. One-time early reduction credits would also be available to emitters that take early action to reduce GHG emissions.
Between 2017 and 2020, the economy-wide cap is expected to decline at a rate of 4.17 per cent each year to meet Ontario’s 2020 emissions-reduction target.

Cost to energy consumers

Under the new Cap and Trade program, the province says it will take steps to ensure that there will not be an overall increase in electricity costs for commercial and industrial consumers, and expects an average benefit of up to $2 per month to residential consumers.

On the other hand, residents are expected to see an estimated 4.3 cents/litre rise in prices at the gas pumps, while natural gas prices could rise by 3.3 cents/cubic metre, and natural gas costs could rise by $5/month.
Those anticipated price increases worry Environment and Climate Change Critic and NDP MPP Peter Tabuns, who says low-income households are going to suffer most.

“The Canadian Centre for Policy Alternatives and Sierra Club recently noted that struggling families spend a higher percentage of their household income on home heating and on gasoline than those from wealthier households,” expressed Tabuns in the Legislature on Feb. 24. “These struggling families have less control over their emissions, particularly if they’re tenants or if they lack access to transit. I believe the vast majority of Ontarians, regardless of income, are ready to do their part to take on climate change, but the burden has to be shared fairly.”

The Greenhouse Gas Reduction Account

On Feb. 24, legislation was introduced that, if passed, would require by law that every dollar made from Ontario’s Cap and Trade program be invested into public transit, clean-tech innovation for industry, electric vehicle incentives, social housing retrofits, and not to reduce the provincial deficit.

Ontario expects to generate approximately $1.8-1.9 billion per year in proceeds from its Cap and Trade program.

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