Government of Ontario Introduces Legislation Ending Cap and Trade Program


The Government of Ontario today introduced Bill 4, Cap and Trade Cancellation Act, 2018. The legislation, if passed, will repeal the Climate Change Mitigation and Low-carbon Economy Act, 2016 and end the province’s cap and trade program.


Retirement and Cancellation of Cap and Trade Instruments


The legislation provides for the retirement and cancellation of Ontario emission allowances, Ontario credits, and Quebec and California emission allowances, offset credits, and early reduction credits ("Cap and Trade Instruments").


  1. Retirement. Cap and Trade Instruments that were held in the cap and trade accounts of an Ontario participant on July 3, 2018 — the date on which Ontario Regulation 386/18 entered into force — and that are not classified with or assigned a vintage year of 2021 are eligible for retirement. The number of eligible Cap and Trade Instruments actually retired will be that number that is equal to, or, as applicable, less than, the aggregate amount of all greenhouse gas emissions attributed to a participant in respect of a time period to be prescribed by regulation. Cap and Trade Instruments held by a participant that are in excess of the aggregate amount of all greenhouse gas emissions attributed to a participant in respect of a time period to be prescribed by regulation will not be retired.

  2. Cancellation. All Cap and Trade Instruments held in the cap and trade accounts of an Ontario participant on July 3, 2018 — other than those Cap and Trade Instruments that are retired (see above) — will be cancelled. All Cap and Trade Instruments created under the Climate Change Mitigation and Low-carbon Economy Act, 2016 and never distributed will also be cancelled.


Compensation


The government will pay compensation to an Ontario participant for the number of Cap and Trade Instruments that is equal to the number of Cap and Trade Instruments held in the participant's cap and trade accounts that are cancelled (see above), less the number of emission allowances that were distributed free of charge to the participant, and less the number of Cap and Trade Instruments held in the participant's cap and trade accounts that are classified with or assigned a vintage year of 2021.


The amount of compensation payable will be determined in accordance with forthcoming regulations, which may prescribe certain criteria that must be met or circumstances that must apply in order for compensation to be paid.


No compensation will be paid to the following participants (unless otherwise provided for by regulation):


  • Market participants;

  • Participants registered with respect to the importation of electricity into Ontario for consumption in Ontario;

  • Participants registered with respect to the distribution of natural gas in Ontario;

  • Participants registered with respect to operation of equipment related to the transmission, storage, and transportation of natural gas;

  • Participants registered with respect to the supply of petroleum products for consumption in Ontario; and

  • Participants registered with respect to the operation of equipment for a transmission system within the meaning of subsection 2 (1) of the Electricity Act, 1998 and that has been issued an order under subsection 78 (1) of the Ontario Energy Board Act, 1998.


Alternative Climate Change Plan


The legislation requires that the government establish targets for the reduction of greenhouse gas emissions in Ontario and allows the government to revise those targets from time to time. Additionally, the Minister of Environment, Conservation and Parks is required to prepare a climate change plan, to be accompanied by regular progress reports. The legislation provides the Minister with the option of appointing an advisory panel for the purpose of preparing the climate change plan.


Causes of Action and Proceedings


The draft legislation also seeks to bar causes of action and proceedings arising out of the cancellation of Ontario's cap and trade program.


Please contact Lisa DeMarco at lisa@demarcoallan.com should you wish to discuss the foregoing.

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