On the eve of a provincial premiers summit on climate change, the Ontario Government has announced it is joining with Quebec and California in a greenhouse gas ("GHG") cap-and-trade system. Ontario, Quebec and California are members of the Western Climate Initiative and represent a carbon market of 61 million North Americans. Ontario joining Quebec to form a linked carbon market will cover over 60% of Canada's population.

Earlier this year, Ontario initiated a 45-day comment period on its prospective climate change policy direction. The principle policy divide facing any market is whether to adopt a carbon tax mechanism or a cap-and-trade mechanism. British Columbia has adopted a carbon tax that taxes every tonne of GHG released as a result of fossil fuel combustion. Ontario has now decided to proceed down the same path as Quebec. Ontario set the table for this announcement by passing Ontario Regulation 452/09 under the Environmental Protection Act. Ontario Regulation 452/09 requires certain Ontario-based facilities to report their GHG emissions and has done so since 2010.

The agreement with Quebec only features general principles at this point. Highlights include:

  • A hard ceiling on the GHG emissions allowed by each sector of the economy.
  • The proceeds raised from the Ontario system will be reinvested in projects that reduce GHG emissions. The Ontario government is promising transparency in this regard.
  • Like virtually all cap-and-trade systems, the Ontario version will reward companies that reduce their own GHG emissions.
  • The next step is to finalize the details regarding joining an integrated Quebec/California cap-and-trade system.

Critics have complained that Canada is lagging behind other nations in taking real, material steps to reduce GHG emissions. Ontario's Environment Minister, Glen Murray, has been critical of Ottawa's approach to the issue and this step (along with other provincial initiatives) is seen as filling the policy gap. Minister Murray stated that further public consultation will be conducted and the final systems details will be completed by October, 2015.

The Bennett Jones Climate Change & Emissions Trading Group is Canada's leading group of skilled, experienced lawyers in this sector. Our lawyers are actively advising participants in British Columbia, Alberta and Quebec – Canada's current "live" GHG compliance markets.