As we reported earlier, the Ontario government passed the final version of the Climate Change Mitigation and Low-carbon Economy Act, 2016 (the Act) on May 18, 2016. The Act received Royal Assent later that same day and is now in force. On May 19th, the government posted the final version of The Cap and Trade Program Regulation (O. Reg. 144/16) (the Regulation). As discussed in an earlier post, the Regulation set out details of the cap-and-trade program proposed for Ontario, including caps, compliance periods, rules related to registration and participation, details regarding who is a mandatory participant and who can participate as a voluntary or market participant, and information on the allocation of allowances. Although the substance of the Regulation has not changed since it was in its draft form, the final version sets out additional details related to the attribution of allowances and circumstances when the Director will determine amounts, registration requirements, and participation in auctions.
The Ministry of the Environment and Climate Change (MOECC) has noted that the following aspects of the cap-and-trade program were changed following consideration of comments during the most recent consultation period:
- Treatment of the electricity component of cogeneration: Facilities that generate electricity and steam via cogeneration for use on-site will receive allowances free of charge for emissions attributable to the electricity generation and the steam generation, to remove disincentives for cogeneration and simplify implementation.
- Allocation changes for some industries subject to energy use benchmarks: To encourage energy efficiency improvements, some industries and facilities will be subject to historical or product-output benchmarks instead of energy-use based allocations.
- Biomass use: A factor was added to the allowance allocation formula that would lower the cap adjustment factor in proportion to any facility’s biomass use, so that facilities using more biomass would see more moderate rate of decline.
- Reporting of biomass: Biomass continues to be treated as carbon neutral however the Quantification, Verification and Reporting Regulation and Guideline do not include the changes that were proposed on measurement requirements and reporting of biomass at this time. The Ministry will continue discussions with partner jurisdictions and stakeholders on this subject.
The Regulation and incorporated Methodology for the Distribution of Ontario Emission Allowances Free of Charge will come into force on July 1, 2016. MOECC has announced that it will be amending the Regulation in 2016 to include provisions on early reduction credits (outlining eligibility requirements and limits), offsets (describing what projects are eligible for use in the cap-and-trade program), the management of allowances when facilities shut down, go bankrupt, or change ownership, and the treatment of indirect steam emissions. MOECC also stated that it will be proposing two additional regulations under the Act in 2016 on administrative monetary penalties, and First Nations impact mitigation from the cap-and-trade program (and in particular, exempting certain fuels delivered to reserves for use by First Nations from the cap-and-trade program).
On the same day the final Regulation was released, a new Quantification, Reporting and Verification of Greenhouse Gas Emission Regulation (O. Reg. 143/16) (the Reporting Regulation) was also released. The Reporting Regulation and incorporated Guideline will take effect January 1, 2017 and will apply to activities by persons on and after that date. The current Greenhouse Gas Emissions Reporting Regulation (O. Reg. 452/09) will be revoked after all reporting under it is complete.
Set out below is an overview of the key features of Ontario’s cap-and-trade program, based on the Act, the final Regulation and Reporting Regulation.
Ontario – Final Cap & Trade Program Details – Overview of Key Features
Click here to view table.