Weekly Compliance Digest – Ontario GHG Cap-and-Trade Program
Bill 172, Climate Change Mitigation and Low-carbon Economy Act, 2016
What is it?
To help mitigate climate change, the Canadian province of Ontario is proposing to implement a GHG cap-and-trade program. The program would aim to reduce the amount of GHG pollution by setting a limit on emissions, reward innovative companies, provide certainty for industries, and create more opportunities for investment. If the proposed Act becomes law, the following elements would be enacted:
- Cap-and-trade auction proceeds directed to a new Greenhouse Gas Reduction Account, which would fund green projects to reduce emissions.
- Annual public report on funds flowing in and out of the account, including a description of funded initiatives and their alignment with climate change action plans.
- Ontario’s GHG reduction targets of 15% below 1990 levels by 2020, 37% below 1990 levels by 2030 and 80% below 1990 levels by 2050 enshrined into law.
- Framework for reviewing and increasing targets, as well as establishing additional interim targets.
- Transitional allowances to large industrial emitters, which would be phased out over a period of time.
- Requirement for the government to prepare and implement a climate change action plan for achieving GHG reduction targets, with progress reports and a review of the plan at least every five years. The action plan would include:
- Timetables for implementing each action.
- Estimates of GHG emissions reductions each action will achieve.
- An assessment of the cost per ton of reductions.
- The amount of funding to be drawn from proceeds generated by the cap-and-trade program.
- Types of initiatives that may be funded from the proceeds of the program, with direct or indirect reduction of GHGs being a minimum requirement. Eligible initiatives include those relating to energy use, land use and buildings, infrastructure, transportation, industry, agriculture and forestry, waste management, education and training, and research and innovation.
Also, the proposed Act includes compliance and enforcement measures for the cap-and-trade program, and would facilitate linking Ontario’s program with the programs of other jurisdictions, including Québec and California.
Who is affected?
According to the text of the Bill, the Act would apply to “prescribed facilities”. Covered facilities will be required to participate in the cap-and-trade program, either reducing their GHG emissions or meeting their compliance obligation through use of other tools, according to their regulatory requirements.
To support the proposed cap-and-trade program, the government is also proposing to revoke the Greenhouse Gas Emissions Reporting Regulation (O.Reg. 452/09) and replace it with a new GHG reporting regulation and incorporated Guideline, which include provisions to allow facilities with emissions between 10,000 and 25,000 tons to opt-in.
What are the requirements?
The Act has three main types of requirements for affected entities:
- Duty to quantify emissions. Entities must quantify the amount of GHG that is emitted during the entity’s prescribed activities at its prescribed facility in Ontario during a prescribed period, and keep the records required by regulation. The records must be retained for the period prescribed by regulation.
- Duty to report. This requirement applies if the amount of emissions is greater than or equal to the prescribed threshold for reporting on emissions for the activity and for the period. Entities must calculate the amount of the GHG emissions that are associated with a prescribed activity during a prescribed period
- Duty to verify. This requirement applies if the amount of emissions is greater than or equal to the prescribed threshold for reporting on emissions for the activity and for the period. Entities must prepare a verification statement addressing such matters as may be required by regulation. The verification statement is subject to audit in accordance with the regulations. In addition, entities must keep records that may be required in connection with an audit of the statement and must retain the records for the period prescribed by regulation.
What is next?
The proposed Act was introduced in the Legislative Assembly of Ontario and passed a first reading on February 24, 2016. The proposal is posted for a 45-day public review and comment period that ends on April 10, 2016. The Act passed a second reading on March 10, 2016, and was assigned to committee. The Act will become law when it passes a third reading which may or may not include amendments.
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