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Ontario is gearing up for groundbreaking cap and trade project

Ontario has been working hard to prepare for cap and trade, an environmental initiative that will put a cap on greenhouse emissions and help high polluters to lower their carbon levels.

The program will lower greenhouse gas emissions substantially and will help Ontario reach its climate goals to 15 per cent below 1990 levels by 2020, and up to 80 per cent by 2050. The Ministry of the Environment and Climate Change has been ramping up in preparation of the ground-breaking environmental program in Ontario, with three officers of the legislature releasing detailed reports on the cap and trade program over the last few weeks. This included the Environmental Commissioner on Nov. 22, the Financial Accountability Officer on Nov. 23, and the Auditor General on Nov. 30. The Ontario government is clearly demonstrating transparency and public awareness of the many positive aspects that involve the cap and trade program.

On Nov. 16, the Minister of the Environment and Climate Change Glen Murray also met with Quebec Premier Philip Couillard and Matt Rodriquez, Secretary for Environmental Protection for California, at the 22nd Conference of the Parties to the UN Framework Convention on Climate Change in Marrakech, Morocco. The three leaders discussed their plan to link the cap and trade programs across international boundaries. Ontario plans to link the cap and trade program to Quebec and California by 2018, which will help the new green economy flourish with increased opportunities for competition. Nova Scotia recently announced it is planning to start a cap and trade program as well.

The Environmental Commissioner of Ontario, Dianne Saxe, mentioned the partnership in her report and commends its positive aspects: “The key purpose of linking is to reduce compliance costs for Ontario emitters. Linking reduces compliance costs in two main ways: Creating a bigger, more liquid market for allowances; and giving Ontario emitters access to lower cost allowances from other jurisdictions.”

Cap and trade is a a large undertaking for Ontario, but increasingly crucial in our climate-based economy. The program forces large polluters to cut down on greenhouse gases or contribute to provincial revenue through carbon credits. Alternatively, if a company lowers their emissions, they can make money by selling their extra credits. The program is expected to make $478 million in its first year, and will generate 1.8 to 1.9 billion in the following years until December 2020. The funds will be directed towards green initiatives such as solar power, energy conservation methods, and battery storage. Either way, both initiatives help the ‘green’ agenda because either a high polluter will help fund green projects or they will lower their carbon emissions.

Cap and trade program will be activated in January 2017.

The Ontario Ministry of Environment and Climate Change is leading the way on the climate change agenda, and it is exciting to imagine the significant impact that cap and trade will have on greenhouse emissions in the province.

Ontario’s cap and trade program is finalized

Ontario has finalized their cap and trade plan, which will place a carbon tax on high-polluting industries that are contributing to climate change. The climate change legislation was passed on Wednesday and emphasizes the importance of accountability and transparency when investing proceeds for the cap and trade into green businesses through the Greenhouse Reduction Account.

The cap and trade program is a part of the bigger Climate Change Action Plan to reduce greenhouse gas emissions 15 per cent below 1990 levels by 2020. By placing a “cap” on carbon emissions and allowing companies to sell off or “trade” unused credits for a profit, it will help limit and lower emissions in the province. Ontario joins Quebec and California, which have cap and trade programs in place already.

Ontario is expected to generate $1.8 to $1.9 billion per year to invest in environmental initiatives in the province through emission auctions. The cap and trade program is scheduled to take effect on July 1 2016. Regulations were determined on Wednesday, including greenhouse gas emission caps, compliance regulations, auction and sale of allowances and distribution of allowances.

The Chamber of Commerce urged Premier Kathleen Wynne to delay the cap and trade program for one year. Criticisms result from a lack of transparency as to where the proceeds of the cap and trade program are going. Many industry leaders that will be affected by cap and trade are reportedly confused about the regulations that will be put in place, though it appears they are more concerned about how they will be affected financially. The program is set to continue despite these trepidations.

On a positive note, Manitoba has joined the cap and trade plan with Ontario and Quebec, but will limit their program to the 20 largest polluters in the province. This will help balance industry competition and outsourcing to neighbouring provinces that aren’t forced to participate in cap and trade, which has become a relevant concern of the program.

Ontario will give a four-year exemption to industries that are especially vulnerable to cap and trade, including steel or cement manufacturing. Emission targets were also released in the report, indicating the exact allowances that will decrease annually to allow existing companies to adjust to the new program. In 2017, emission allowances are 142, 332,000 tonnes, which will decrease over four years to 124, 668,000 in 2020.

Though the cap and trade program will be a difficult adjustment initially for companies, it will soon become an integral part of doing business while taking the environment into consideration. This is an opportunity for green businesses to take the lead and for Ontario to set an example for the remaining provinces that cap and trade is the only way to make climate change protocol the foremost item on the agenda.

Cap and trade details released in 2016 budget

For all of the Ontarians that were muddled by the lack of information in the cap and trade proposal, many of those questions have been resolved in the 2016 Ontario budget.

The Ontario Liberal government has released specific details about the cap and trade program, which is set to begin in January 2017 under the new Climate Change Mitigation and Low Carbon Economy Act. The cap and trade program will enforce a “cap” on the amount of greenhouse gases that each company can produce. Companies will be able to then “trade” unused carbon credits by selling them to companies that exceed their “cap”.

This enables companies that use clean energy to create financial gains and penalizes companies that have high levels of carbon emissions. The cap and trade program is expected to raise $428 million in 2016-2017 and is then projected to raise up to $1.8 to $1.9 billion in 2017-2018.  Cap and trade is one of the many initiatives the provincial government has enacted to reduce greenhouse gas emissions by 80 per cent below 1990 emissions by 2050.

All of the proceeds from the cap and trade program will go to projects and funds in the Greenhouse Gas Reduction Account, which will then support other green projects. The Ontario government has promised the money raised will be transparent, with results of the funds available for the public. Possible green projects include public transit, electric vehicle incentives, social housing retrofits including geothermal infrastructure, and clean-technology incentives for industries.

Ontario’s cap and trade program is mandatory for industries and institutions that emit 25,000 tonnes or more of greenhouse gases annually. It also includes suppliers and distributors of fuel that distribute 200 litres of fuel or more per annum. Companies that import electricity and fuels into Ontario would also be included in the cap and trade. The businesses mandatorily included within the program are representative of 83 per cent of the total greenhouse gas emissions produced in the province.

Initially, Ontario will give free permits to industries that are especially vulnerable to the cap and trade program, including steel or cement manufacturing, to avoid “carbon leakage”, the feared result of companies leaving Ontario to go to other jurisdictions where the carbon cap wouldn’t apply.

Companies and organizations that produce over 25,000 tones of greenhouse gases due to it’s size — like university campuses, hospitals, and electricity generators — will have to purchase carbon permits, which is how the government will make substantial profit in the coming years. If these industries apply clean technologies, they will be able to then “trade” their extra credits and make money from carbon-emitting industries.

Free credits will also be provided on a one-time basis to industries that have voluntarily lowered emissions targets earlier then the January 2017 deadline. Companies with between 10,000 and 25,000 tonnes of greenhouse gases will also have the choice to participate in the cap and trade program, but won’t be forced to.

The “cap” is also set to decline annually to meet 2020 carbon emissions targets and will decrease at a rate of 4.17 per cent per year. A slow decrease in rates allows companies to invest in clean industries slowly and adjust to the new cap and trade program.

Many Ontarians are concerned about rising prices from the cap and trade program. Gas prices are set to increase 4.3 per cent per litre and natural gas costs for home heating will rise $5 per month. Though these increasing prices will put more financial pressures on the consumer, energy programs are being introduced to help mitigate the costs.

Recently, the government introduced an incentive of up to $14,000 to purchase an electric vehicle. Enbridge Gas Distrubtion and Union Gas are also offering programs to help homeowners reduce their electricity costs. An incentive ranging between $1000 and $2,500 is offered if a consumer replaces their furnace and water heating system to a more energy reductive alternative. Enbridge also offers a $75 incentive for an adaptive thermostat, which helps save on heating costs as well.