On Monday April 13th, 2015, Ontario Premier Kathleen Wynne announced that the province is introducing a cap and trade system for greenhouse gas emissions (“GHG”). The system will have a hard ceiling on the total GHG emissions allowed in each sector of the economy. It will be designed to reduce the amount of GHG’s emitted in Ontario by setting a limit on emissions, while at the same time providing incentives for energy efficient and innovative companies to make further investments in GHG reductions.

The Premier signaled that Ontario will join the cap and trade system under the Western Climate Initiative, a group of (originally western) North American states and provinces focused on climate change reduction measures. She also indicated that the government will reinvest the money raised through the cap and trade system back into projects that reduce GHG’s. Such projects may include energy-efficient appliances or housing, public transit, and energy efficiency initiatives for industry.

Next Steps: The Design of the Cap and Trade System for Ontario

The government background documents that accompanied the Premier’s announcement indicate that the “province will work with communities and consult with industry on the design of the cap and trade system over the next six months”. In addition, the Ontario government will align its cap and trade system with those in Québec and California which are more established.

The basic design features of the Ontario cap and trade system will follow that of the Western Climate Initiative where a cap sets a maximum amount of GHG’s measured in tonnes that industry will be allowed to produce. Over time, the cap or ceiling will be lowered which will result in lowering overall GHG emissions. Trading of GHG’s will be allowed in a market established for companies to buy and sell GHG credits depending on their GHG emissions. If their GHG emissions exceed their cap then companies can purchase credits from more efficient companies that sell their credits into the GHG market.

Coming Events: Climate Summit of the Americas

With this recent news as the backdrop, Ontario is hosting a “Climate Summit of the Americas” between July 7th  and 9th, 2015 in Toronto with Pan-American jurisdictions. The Ontario Government has stated that the purposes of the summit include working “towards common approaches to reducing greenhouse gas emissions… and highlight[ing] opportunities for investing in a global low-carbon economy.”

Implications: Stay Tuned

The implications of the introduction of a cap and trade system in Ontario are as yet unknown. Different business activities will be subject to varying impacts, some positive and some less so. As more details become available, and potential impacts of the system are able to be predicted, it will be important for industry and other stakeholders to keep on top of developments in this area and to provide comments to the Government of Ontario.