Ontario Cap and Trade Update

Yesterday, the Ontario Ministry of Environment and Climate Change posted its regulatory proposal to amend the Cap and Trade Program Regulation (O.Reg. 144/16), in order to include offsets provisions that will be developed to allow for high quality offset credits with integrity, transparency and financial value within Ontario’s cap and trade program. The deadline for feedback to this proposal is December 30th, 2016.
Per the EBR posting found here, Offset Credits are a compliance instrument contemplated under the current cap and trade regulation. Facilities and sectors not subject to the cap and trade regulation that are able to reduce greenhouse gases in accordance with the proposed requirements and associated protocols will be eligible to seek to have offset credits created and issued. Offset Credits may be used by capped facilities to meet up to 8% of a compliance obligation.
Ontario awarded a contract to the Climate Action Reserve to adapt 13 existing offset protocols (the rules specific to various project types such as forest management and fertilizer use) for use in Ontario and Quebec under the cap and trade program. Three protocols will be in place by early 2017 with the remainder by 2017-18.

The regulatory proposal provides an overview of the criteria, process and administrative requirements for the registration of offset initiatives and the creation and issuance of offset credits that can be used to meet a compliance obligation.

The offsets regulatory proposal outlines the policy for a number of program elements, including:

  • Offsets Initiative Registry
  • Start Dates
  • Crediting Periods
  • Reporting Requirements
  • Verification Requirements
  • Offset Credit Creation Criteria
  • Buffer Account
  • Offset Credit Issuance
  • Project Reversals

The EBR posting for this regulatory proposal also notes that while cap and trade will encourage reductions, there may also be opportunities to reduce greenhouse gases beyond the cap and trade program and the offset credits that form part of that program.

The government is leading by example and has committed to government operations being carbon neutral by 2018. As part of this commitment, the government will engage with relevant stakeholders on the development of a separate class of quality, branded, voluntary reduction instruments for use by government and the private sector. All of these voluntary reduction instruments will come from Ontario-based projects ensuring that the social and economic benefits accrue to the citizens of Ontario. Voluntary reduction instruments would be unique and could occur anywhere within the province including rural areas and in Northern Ontario.

The Ministry proposes to form a working group to provide advice and help identify the best means to foster voluntary reductions and removals of greenhouse gases. There will be a policy posting in 2017 that will expand on the Government’s approach to encouraging the creation of voluntary reduction instruments, which will be separate from cap and trade and distinct from the offset credits and other compliance instruments created for cap and trade.

If you have any questions on this, click here for ORTECH's Cap and Trade Readiness services.