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May 03, 2009

Ontario prepares legislative groundwork for GHG cap-and-trade system

On May 27, Minister of the Environment John Gerretsen introduced Bill 185, theEnvironmental Protection Amendment Act (Greenhouse Gas Emissions Trading), 2009.

Bill 185 amends the Environmental Protection Act (EPA) to allow Ontario to implement its own emissions trading scheme. It is designed to allow the Province to fulfill its obligations under the Western Climate Initiative (WCI) and its Memorandum of Understanding with Quebec. The proposals also anticipate implementation of a cap and trade scheme in the USA and the emergence of a North America wide scheme. Such a scheme could be in place as early as 2012.

The Bill re-enacts section 176.1 of the EPA, which authorizes the making of regulations relating to emissions trading and other market-based approaches. The Province’s current NOx and SOx trading scheme operates under these provisions. The Bill clarifies that section 176.1 applies to greenhouse gases (GHGs).

Specifically, the proposed amendments expand and clarify the current regulation-making powers under section 176.1 to:

  • establish the scope of a GHG cap-and-trade program;
  • cover the creation, use, distribution, and trading of allowances and offsets;
  • support the distribution of GHG allowances by auction, free of charge or by other means;
  • establish monitoring and reporting requirements;
  • support emission trading across jurisdictions; and
  • permit the delegation of regulation-making powers to another person or body.

The MOE has also released a discussion paper, Moving Forward: A Greenhouse Gas Cap-and-Trade System for Ontario. That paper will guide consultations over the summer on what Ontario’s cap-and-trade emission trading system should look like. Both the proposed amendments and the discussion paper have been posted on the Environmental Registry for a 60-day comment period, with a deadline of July 26, 2009.

Background:

In a cap-and-trade system, governments set and apportion limits on the total amount of GHGs that can be emitted from regulated facilities. Facilities can earn credits for reducing their emissions below these. Facilities that fall short of their targets can avoid a fine by buying those credits. Other emissions savings projects (offsets) by non-regulated entities can earn credits to sell into this market.

Ontario is currently working with Quebec, British Columbia, Manitoba and seven U.S. states (Arizona, California, Montana, New Mexico, Oregon, Utah and Washington) to develop a common GHG trading system, the WCI. In June 2008, the province also signed a Memorandum of Understanding with Quebec to collaborate on a regional cap-and-trade system for GHGs. The introduction of the proposedAmerican Clean Energy and Security Act (the Waxman-Markey Bill) indicates that the USA could establish its own national cap and trade program as early as 2012.

For more information, contact:

Paul Manning - (416) 862-4843