Ontario cap and trade

On April 13, 2015, the Premier of Ontario, Kathleen Wynne, announced the province would join the cap and trade system under the Western Climate Initiative. The details of cap and trade are yet to be worked out, and a special advisor and climate action group has been set up.

How much are the expected costs and revenue?

The expected emissions in 2020 is about 168 Mt, which leaves a gap of 18 Mt based on the emissions target of 150 Mt. Analysis done by Enviroeconomics suggests that this gap can be covered by a combination of reduction measures and import of offsets from other Western Climate Initiative (WCI) partners. About 6.5 Mt of reductions are expected to be achieved by reductions within Ontario at per tonne prices that are below the estimated permit prices. The remaining 11.5 Mt of emssions reductions will be covered by offset imports from out-of-Ontario WCI patners. The costs to industries will be $55 milliion for the former and $205 million for the latter. On the revenue side, about $2 billion is expected to be raised from of the auction of emissions permits to those emitters covered under cap and trade with the assumption that some industries will get free allocation based on potential adverse impacts on their competitiveness. The foregone revenue is expected to be $433 million.

PriceCarbonNow's infographic on Ontario cap and trade details (download pdf here)

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Industry lobbying for exemptions or free allocations

Twenty companies and industry lobby groups have begun to lobby the government for exemptions and free allocation of emissions permits. Minister of the Environment and Climate Change, Hon. Glen Murray, said he is considering providing free permits and allowing some polluters a longer time frame to make futher reductions. However, it should be noted that studies have suggested that adverse impact on competitiveness may be limited to a handfull of sectors, particularly cement and lime, petroleum and metals (see our infographic on industrial competitiveness).