Regarding the sections (6, 7…

Regarding the sections (6, 7, 8) related to the retirement, cancellation and compensation of allowances (instruments) for a participant, we have the following comments:

The current methodology for compensating capped market participants (Ontario industries) who bought allowances (either in auction or from a 3rd party) in good faith for the purposes of fulfilling an expected compliance obligation for the end of the first compliance period is deeply flawed and unfair. The current methodology as described in sections, 6, 7 and 8 of the Bill, effectively renders any allowances purchased in auction or from a 3rd party (who purchased the allowances at auction), essentially worthless and thus will penalize Ontario Industries who acted in good faith following the rules of the program at the times the rules were written. Sections 6, 7 and 8 of the proposed Bill must be amended to ensure those Ontario capped market participants (e.g., industries) can be fairly reimbursement for allowances purchased for the intended purposes of fulfilling a compliance obligation in the first compliance period at a fair market rate.

An equitable and simplified methodology for reimbursing capped market participants is one where;
1) Capped market participants are provided reimbursement for allowances that were in the purchased in auction or from a 3rd party, for the purposes of fulfilling an expected compliance obligation in the first compliance period.
2) Free allowances that were provided by the Ontario Government for the years 2017 and 2018 should be cancelled or retired, regardless of the emissions during those periods. Emissions of the organizations should not be a factor in determining reimbursement since the Cap and Trade program has been cancelled.
3) The compensation formula and retirement & cancellation should be simplified such that:
a) A market participant’s free allowances provided by Ontario should be cancelled (for the years 2017 and 2018).
b) Remaining allowances in a Market Participants cap and trade account, e.g. (those purchased in auction or on the open market) must be eligible for compensation at a fair market price.
c) The compensation (reimbursement) program must include an appeals process if capped market participants feel the compensation framework does not reflect the level of reimbursement they are owed.

Additional Comments regarding the Bill:
Regarding the Ontario Government’s proposed future GHG reduction and target setting process:
- Industry supports setting of voluntary targets to reduce GHG emissions. The Integrated steel sector in Ontario is a highly emission intensive and trade exposed industry and setting fixed targets will hurt the competitiveness of the Ontario Steel industry as compared to our most direct competitors in the United States (no GHG target or carbon pricing exist). We are also subject to the additional burden of unfairly applied tariffs for product shipped the US, which puts Ontario Steel industries at a further disadvantage.
- Incentive programs must be in place to complement achieving targets. The purpose of incentives is to improve energy efficiency, reduce GHG’s and improve the overall competitiveness of Ontario industry to compete on a global platform.
- If the Government chooses to set non-voluntary targets, a simple program with reasonable low cost carbon pricing needs to be considered so industries can invest in GHG reduction technologies and achieve a reasonable rate of return for those investments.
- Regardless of the GHG reduction program (voluntary or not) the Government must recognize fixed process emissions that industry cannot reduce with existing technology. This was done well in the previous cap and trade program and should be revisited in future programs.
- Any program design going forward must limit bureaucratic burden of reporting, verification and meeting compliance targets.
- Should carbon pricing be considered, it should be tied to North America or European cost benchmarks in order to be competitive globally.
- All funds paid into a carbon pricing program must be 100% returned to Industry to be invested in new technologies to reduce GHG emissions
- Industry GHG targets that may be set should be relative to a year 2010 baseline to reflect investments already made by industry to reduce GHG emissions and improve efficiency.