On May 27, 2009, the Ontario government introduced Bill 185, the Environmental Protection Amendment Act (Greenhouse Gas Emissions Trading), 2009. This new legislation proposes amendments to the Ontario Environmental Protection Act that would provide the regulatory authority to set up a greenhouse gas cap-and-trade system in Ontario. The changes would permit the creation of regulations that would set rules around various aspects of a cap-and-trade system, such as the granting and/or auctioning of allowances, linking to other trading systems, credit for early action, the use of offsets, and verification and reporting provisions.

The government also released a discussion paper, Moving Forward: A Greenhouse Cap-and-Trade System for Ontario, which outlines the elements of a cap-and-trade system, gives a background and overview of previous stakeholder comments on each element, and outlines design issues and policy options for each element. Government news releases indicate that stakeholder discussions on the details of a cap-and-trade system will continue over the summer and fall of 2009. Our information is that, at this point, the preferred model inside the government resembles the nitrogen oxides and sulphur dioxides Regulation 194/05, albeit with a possible auction component as well as provisions for offsets.

Industry and stakeholders are encouraged to comment on the proposed legislation and, most importantly, on the discussion paper. The details of the cap-and-trade system that is finally adopted in Ontario, such as the extent of credit that is given for early action and the mechanism chosen to allocate allowances (whether by auction or gratis), will have broad implications for regulated emitters. The comment period on the proposed legislation and discussion paper is open for 60 days, until July 26, 2009.

For the proposed legislation and discussion paper, please see http://www.ebr.gov.on.ca/ERS-WEB-External/ (EBR #010-6740).