A decision has been made to proceed with a greenhouse gas Cap and Trade Program Regulation and incorporated allocation methodology and new Quantification, Reporting and Verification of Greenhouse Gas Emissions Regulation and incorporated Guideline under the Climate Change Mitigation and Low-carbon Economy Act, 2016.
The Cap and Trade Program Regulation is a key initiative for the government to tackle climate change. A cap and trade program will reduce the amount of greenhouse gas pollution going into our atmosphere by setting a limit on emissions, rewarding innovative companies, providing certainty for industries, and creating more opportunities for investment. The Cap and Trade Program Regulation and allocation methodology will take effect July 1, 2016.
The new Quantification, Reporting and Verification of Greenhouse Gas Emissions Regulation and incorporated Guideline will take effect January 1, 2017 and applies to activities by persons on and after January 1, 2017. It includes a number of changes that will support the implementation of Ontario’s cap and trade program. Ontario Regulation 452/02 under the Environmental Protection Act, R.S.O. 1990, will be revoked after all reporting under it is complete.
The Cap and Trade Program Regulation and new Quantification, Reporting and Verification of greenhouse Gas Emissions Regulation were filed with the Registrar of Regulations on May 19, 2016.
The following aspects of the cap and trade program have changed through consideration of the comments provided through the EBR posting:
- 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
Proposed Amendments to the Cap and Trade Program Regulation and Quantification, Reporting and Verification of Greenhouse Gas Emissions Regulation
The Ministry of the Environment and Climate Change (the Ministry) will amend the Cap and Trade Program Regulation and where necessary, the Quantification, Reporting and Verification of Greenhouse Gas Emissions Regulation in 2016 to include provisions on:
- The treatment of indirect steam emissions. Facilities not emitting more than 10,000 tonnes of greenhouse gases per year will be able to opt-in to the program on the basis of deemed indirect emissions from steam purchases to maintain a level playing field between regulated facilities.
- Early reduction credits, outlining eligibility requirements and the number of credits that will be issued.
- Offsets, describing the requirements proponents must meet to be able to create, verify and register offset credits for use in Ontario’s greenhouse gas cap and trade program.
- The management of allowances when facilities shut down, go bankrupt, or change ownership.
The Ministry consulted the treatment of indirect steam emissions and early reduction credits as part of the cap and trade regulatory proposal and revised Guideline for greenhouse gas emissions reporting that were posted on the Environmental and Regulatory Registries (EBR 012-6837) on February 25, 2016. As a result, the Ministry will not be consulting on these program design features again. An information notice will be posted once the amendments have been filed with the Registrar of Regulations.
The Ministry will consult on provisions for offsets and facility shutdowns.
Proposed Regulations Under the Climate Change Mitigation and Low-carbon Economy Act
The Ministry will be proposing two complementary regulations later in 2016 under the Climate Change Mitigation and Low-carbon Economy Act, 2016 on:
- Administrative monetary penalties, describing what particular types of contraventions attract which amounts of administrative monetary penalties.
- First Nations impact mitigation, exempting certain fuels delivered to reserves for use by First Nations from the cap and trade program.