• Ontario to introduce a cap-and-trade program effective January 1, 2017
  • Under the program, the Ontario government is expected to generate proceeds in excess of $1.8 billion through the sale of carbon allowances
  • The program is expected to increase Ontario fuel prices
  • The Ontario program will link up with existing cap-and-trade programs in Quebec and California under the Western Climate Initiative

How it works?

  • Ontario is expected to set a aggregate cap on emissions
  • The cap equates to the total number of carbon allowances that will be sold though an auction or issued free-of-charge by the province, with one allowance being equal to one tonne of emissions
  • Emitters will be required to obtain sufficient allowances to cover their emissions in a given compliance period
  • The first compliance period is scheduled to run until December 31, 2020
  • Following the end of a given compliance period, each emitter must submit a number of allowances equal to their total emissions
  • If a company does not emit as much as their cap, they are able to sell their excess allowances, but cannot return unused allowances back to the government
  • Companies may also invest in offset measures which count towards a certain percentage of their allowance requirements 

Expected Ontario Costs1

Click here to view the table.

Use of Proceeds

  • The proceeds generated from the sale of allowances will fund various initiatives that balance emissions reduction and economic growth
  • Investments are expected to be focused towards improving efficiencies within the infrastructure and transportation sectors 

Allocation of Allowances 

  • Many large emitters will receive free allowance allocation until 2020
  • Free allocation will be provided to competitively sensitive industries such as cement, lime and steel
  • Small and medium sized emitters will be required to purchase allowances
  • Allowances will be issued through government run auctions in which a regulated floor price is set
  • The costs of purchasing allowances is expected to be passed down onto consumers initially, typically in the form of higher energy prices

Who is Captured?

  • Mandatory participation for emitters of at least 25,000 tonnes of C02e annually
  • Voluntary opt-in for emitters of between 10,000 and 25,000 tonnes C02e annually