Following recent public consultations on its Climate Change Discussion Paper, Ontario is expected to bring in a cap-and-trade system which reports say could raise between $1 billion to $2 billion per year, depending on the price of carbon permits. Ontario Environment Minister Glen Murray is expected to present the plan to cabinet for approval by mid-April 2015. Under a cap-and-trade system, a limit is placed on total greenhouse gas (GHG) emissions with the price of carbon being determined by the market. Under the system envisioned by Ontario, the cap will be divided into permits, some of which will be given away (to maintain competitiveness, particularly where a particular industry is trade sensitive) while the remaining permits will be auctioned off. Regulated emitters will be required to obtain a sufficient number of permits to cover their emissions and where emitters are able to reduce emissions, they will be able to sell permits to those emitters who need more. The auction proceeds will likely be directed into GHG emission reduction initiatives such as energy conservation retrofitting.
Once implemented, Ontario’s system could be linked with Quebec and California’s current cap-and-trade program, which would create a carbon market of 61 million people that covers more than 60% of Canada’s population. Ontario’s cap-and-trade plan has been waiting in the wings for a while. The province agreed to price carbon when it joined the Western Climate Initiative with Quebec, B.C. and California in 2008, and subsequently the Ontario government passed enabling legislation for a cap-and-trade system. However, cap-and-trade soon took a back seat to the recession and political uncertainty meant that there was little appetite for moving forward with climate change plans. With Ontario Premier Kathleen Wynne taking a climate leadership role, there is new impetus for bold action on GHG reduction initiatives at the provincial level.