Strides towards carbon pricing

Current state of carbon pricing in Ontario

The Ontario government passed cap and trade enabling legislation in 2009 (Bill 185, The Environmental Protection Amendment Act (Greenhouse Gas Emissions Trading))1, however it opted out of the 2012 launch of the Western Climate Initiative, citing the need for time to collect emissions data from large industrial facilities, which would be required to base its carbon budget and allocate permits, and over concerns of industry competitveness.2,3 In the fall of 2011, former Premier Dalton McGuinty renewed the government's commitment to putting in place a cap and trade system that is right for Ontario. Opposition leader, Andrea Horwath is supportive of an Ontario cap and trade system, while the Green Party of Ontario has proposed a carbon fee and dividend system.4

In 2013, the Ontario Ministry of the Environment released another discussion paper, “Greenhouse Gas Emissions Reductions in Ontario. A discussion paper” further outlining principles and goals, potential elements, scope and targets for the program.5 Following this, the government sought comments from the public, industry stakeholders, non-governmental organizations and Ontario’s Aboriginal communities. In 2013, Sustainable Prosperity, Climate Action Network Canada, and other entities made submissions to the Ontario Consultation on Greenhouse Gas Emissions Reductions Program Design 2013.6,7 The Climate Action Network Canada urged the government to strengthen the program so that it can contribute to most of the province's 2020 emissions reduction target (i.e. adopt stronger targets for the system); broaden sectors covered; auction 100% of all permits; avoid overallocation of permits; use revenue recycling of auction revenues to further strengthen emissions reductions, reduce program costs, improve economy, address competitiveness impacts on Ontario’s industries; limit use of offsets; and use offsets that are “real, quantifiable, verifiable, permanent, additional, enforceable,” adhering to strict offset protocols, and leading to Ontario emissions reduction.7

On January 14, 2015, Premier Wynne indicated that the government will unveil a carbon pricing system in Ontario in the spring of the same year. However, the type of carbon pricing system to be implemented was not revealed. And, on February 12, 2015, the Ministry of the Environment and Climate Change released a discussion paper "Ontario's climate change discussion paper 2015" and sought input from the public on the "best path forward for adapting to climate change in your community and reducing carbon emissions." Several were held across Ontario to get public input on carbon pricing in the province. 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, revenue and other details?

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 (see our infographic on revenue and costs of Ontario cap and trade).

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).

References

1.    Bill 185, Environmental Protection Amendment Act (Greenhouse Gas Emissions Trading), 2009. (2009). at http://www.e-laws.gov.on.ca/html/source/statutes/english/2009/elaws_src_...

2.   Environmental Commissioner of Ontario. Carbon pricing. Environ. Comm. Ont. (2013). at http://www.eco.on.ca/blog/tag/carbon-pricing/

3.   Holmes, M. All Over the Map 2012. A comparison of provincial climate change plans. (David Suzuki Foundation, 2012). at http://www.davidsuzuki.org/issues/climate-change/projects/race-to-the-to...

4.   The Canadian Press. McGuinty says he’ll support ‘right’ cap-and-trade plan. Kitchener CTV News (2011). at http://kitchener.ctvnews.ca/mcguinty-says-he-ll-support-right-cap-and-tr...

5.    Ontario Ministry of the Environment. Greenhouse Gas Emissions Reduction In Ontario. A discussion paper. (Ontario Ministry of the Environment, 2013). at http://www.downloads.ene.gov.on.ca/envision/env_reg/er/documents/2013/01...

6.   Sustainable Prosperity. Sustainable Prosperity Submission. Consultation on Greenhouse Gas Emissions Reductions Program Design 2013 (Ontario). (Sustainable Prosperity, 2013). at http://www.sustainableprosperity.ca/dl984&display

7.    Climate Action Network Canada. CAN-Rac Comments on “Greenhouse Gas Emissions Reductions in Ontario: A Discussion Paper". (Climate Action Network Canada, 2013). at http://climateactionnetwork.ca/2013/04/24/can-rac-comments-on-greenhouse...