This consultation was open from:
September 22, 2017
to November 6, 2017
Decision summary
We made changes to Ontario’s cap and trade program to link it with the programs in Quebec and California, set program caps for 2021-2030 and improve fair treatment amongst participants.
Decision details
Updates
This decision notice was originally published on November 28, 2017 and was updated on December 28, 2017. Please see the section ‘Administrative Penalties Regulation (O. Reg. 540/17)’ for the updated information.
Decision on regulation
A decision has been made to proceed with amendments to the greenhouse gas cap and trade program, which include changes to the:
- Cap and Trade Program Regulation (O. Reg. 144/16)
- Methodology for Distribution of Ontario Emission Allowances Free of Charge
- Quantification, Reporting and Verification of Greenhouse Gas Emissions Regulation (O. Reg. 143/16)
These amendments will link Ontario’s cap and trade program with the corresponding cap and trade programs in Quebec and California, effective January 1, 2018; Establish caps for 2021-2030 at levels that will facilitate the achievement of Ontario’s legislated province-wide 2030 GHG emissions target; and provide fair and equitable treatment of program participants, including administrative amendments to improve program efficiency.
The amendments are further described in the subsections below. They align with and build off of the regulatory proposal (EBR 013-1457), with one exception:
- The regulatory proposal indicated that market participants would not be able to be registered in multiple jurisdictions.
- Upon further consideration and consultation, market participants will be allowed to register in multiple jurisdictions.
- Any participant who has accounts in more than one of the linked jurisdictions will be treated as related persons and will be required to share holding limits and purchase limits on allowances and credits which will help to preserve market integrity.
A decision was also made to establish a new Service of Documents Regulation under the Climate Change Mitigation and Low-carbon Economy Act, 2016 which sets out how documents can be given or served under the Act.
Administrative Penalties Regulation (O. Reg. 540/17)
A decision was also made to establish a regulation under the CCMLEA that provides a framework for issuing administrative penalties. The regulation determines of the amount of, and the manner in which, the ministry will issue an order to pay an administrative penalty for non-compliance with the CCMLEA and its regulations, including:
- The framework and process for issuing administrative penalties
- The ranges of penalties and their maximum amounts
- The considerations that would be made when determining exact penalty values
- Potential reductions for actions taken to prevent and mitigate the contravention subject to the administrative penalty
Regulatory amendments to the Cap and Trade Program Regulation (O. Reg. 144/16); quantification, reporting and verification of Greenhouse Gas Emissions Regulation (O. Reg. 143/16); and incorporated methodologies and guidelines
Linking
Amendments to the cap and trade regulations are being adopted in order to successfully implement and operate a linked cap and trade program. These include amendments:
- Recognizing compliance instruments from California and Quebec and allowing trading between registered participants in all three jurisdictions;
- Enabling joint allowance auctions to be held by all three jurisdictions;
- Setting an Ontario minimum annual auction price beginning at $13.75 CAD in 2017 and escalating each year by five percent plus inflation;
- Expanding the holding limit to account for the size of the larger linked market;
- Expanding the purchase limit to account for the size of the larger linked market;
- Allowing registration in multiple jurisdictions for mandatory, voluntary and market participants;
- Clarifying and extending requirements regarding related persons to persons who are registered in Quebec or California; and
- Expanding the director’s authority to cancel the registration of a market participant under specific circumstances related to contraventions and convictions.
The Ministry of the Environment and Climate Change intends to propose further amendments to the Cap and Trade regulation in 2018 that would have the effect of requiring Ontario cap and trade participants to replace California offset credits that were submitted for compliance purposes and later cancelled by California with other allowances or credits.
In the interim, the current amendments restrict Ontario participants from transferring California offset credits from their holding accounts (trading account) into their compliance accounts until November 1, 2021 (the true up date for the first compliance period). Ontario participants will be able to buy, hold and trade the credits in the meantime.
2021-2030 caps
The amended regulation establishes annual, program-wide emissions caps for the years 2021 to 2030, at a level that will facilitate the achievement of Ontario’s 2030 GHG emissions reduction target.
The caps take account of projected emissions from covered and uncovered sectors, as well as the projected emissions associated with electricity imports.
The proposed caps decline from 124.7 Mt in 2020 to 88.5 Mt in 2030, declining by 3.6 Mt per year or at an average annual rate of 2.9 percent. This rate of decline is less steep than the 4.17 percent rate of decline during the 2017-2020 compliance period.
Year - Total Cap (tonnes CO2e)
2020 - 124,668,000
2021 - 121,058,000
2022 - 117,438,000
2023 - 113,818,000
2024 - 110,198,000
2025 - 106,578,000
2026 - 102,958,000
2027 - 99,339,000
2028 - 95,719,000
2029 - 92,099,000
2030 - 88,479,000
Improving fair and equitable treatment amongst program participants
MOECC is adopting the following amendments to the regulations under the Act and the Methodology incorporated by reference in order to support fairness and equity in the cap and trade program and to support accuracy and program efficiency:
- Distributing allowances free of charge to voluntary participants in recognition of non-combustion, process emissions;
- Distributing allowances free of charge to industrial users of electricity from certain cogeneration;
- Requiring entities reporting emissions to submit verification reports;
- Establishing a deadline for the registration of voluntary participants;
- Changing the deadline for annual applications for allowances free of charge; and
- Changing the date for distribution of allowances in specific years.
Service regulation for the Climate Change Mitigation and Low-carbon Economy Act, 2016
MOECC is adopting this new regulation to provide clarity on the:
- method and conditions for giving or serving documents (e.g. by courier, email or fax);
- individuals who may be given or served a document (e.g., individuals, types of businesses, Directors appointed under the Act, the Minister of Environment and Climate Change); and
- requirements as to when service is deemed to have been made.
Comment(s) received on the proposal: 28
Public Consultation on the proposal for this decision was provided for 45 Days, from September 22, 2017 to November 06, 2017.
As a result of public consultation on the proposal, the Ministry received a total of 28 comments: 22 comments were received in writing and 6 were received online.
Additionally, a copy of all comments are available for public viewing by contacting the Contact person listed in this notice.
Effects of consultation
Effect(s) of consultation on this decision
On September 22, 2017, the Ministry of the Environment and Climate Change posted a regulatory proposal to the Environmental Registry (EBR 013-1457) for 45 days. As a result of consultation on the proposal, the Ministry received a total of 28 comments: The following subsections provide a summary of key comments received and responses.
Linking
Comment: Majority of stakeholders supportive of linking January 1, 2018. Several stakeholders recommended a delay in linking until Ontario’s offset system is operational or other changes are made.
Response: Linking will take effect January 1, 2018 to provide capped emitters access to lower cost emission reductions, reducing costs to Ontario businesses and households.
2021-2030 caps
Comment: Majority of stakeholders supportive of setting caps to 2030. Some industry stakeholders emphasize importance of program design certainty for future compliance periods, particularly as it relates to allocation, in order to support planning and investment decisions.
Response: Annual caps for 2021-30 will be included in the regulation. Allocation will be addressed separately through post-2020 program design process.
Verification reports
Comment: A number of stakeholders expressed concern with the proposed requirement to submit verification reports containing business confidential information and requested that MOECC have processes in place to protect confidentiality.
Response: The amendment will be adopted as proposed. MOECC has strict controls in place to manage the receipt and handling of confidential information.
Regional cogeneration
Comment: Many stakeholders expressed support for proposed amendment for certain customers of the Sarnia regional cogeneration system. Several stakeholders expressed concern with potential differential treatment of cogeneration units and the impact on local air quality.
Response: The amendment will be included in regulation as proposed in order to provide equitable treatment of cogeneration across the program. The proposal will not exacerbate air quality concerns and the cap decline will mean further reductions in GHGs.
Holding limits
Comment: Several stakeholders expressed concern that overall holding limits in a linked market will be lower than the combined holding limits of unlinked markets, affecting entities with obligations in multiple jurisdictions and increasing administrative burden.
Response: Holding limits must be calculated the same way for all emitters in all jurisdictions. In a linked market, participants cannot have different holding limits depending on which jurisdiction(s) they are registered in. Amendment will be included in regulation as proposed.
Allocation for process emissions from voluntary participants
Comment: Several stakeholders expressed support for proposed change. One stakeholder expressed opposition to expansion of free allocation.
Response: Amendment will be included in regulation as proposed in order to treat capped participants equitably.
EBR posting
Comment: Several stakeholders recommended publication of draft regulation and/or economic modelling prior to Jan 1, 2018 entry into force.
Response: The regulatory proposal provided significant detail. In order for linking to take effect Jan 1, 2018, only the final regulatory amendments are being posted.
Offsets
Comment: Several stakeholders expressed strong interest in seeing compliance offset program implemented, as well as a voluntary offset program.
Response: Work to develop robust Ontario Compliance and Voluntary Offset Programs is ongoing.
Post-2020 program design
Comment: Many stakeholders shared general principles and specific comments on post-2020 program design, particularly regarding allocation methodologies.
Response: Comments will be considered as part of the development of a post-2020 program design and will include further consultations.
Use of administrative penalties
Comment: A number of stakeholders expressed support for administrative penalties and the approach being taken. Some concern was raised that administrative penalties would replace prosecutions for more serious contraventions and cannot be applied to directors or officers of a corporation.
Response: The CCMLEA provides the ability for the ministry to address non-compliance using a number of tools, including concurrent use of administrative penalties and prosecution. The ministry will use its Compliance Policy to take a graduated approach to compliance – using the most appropriate and effective tool to address non-compliance.
Where there is non-compliance, subsection 57(6) of the CCMLEA requires an administrative penalty to be issued to a corporation, not its officers, directors, agents or employees. In addition, to ensure fairness, lower penalty values are proposed in the regulation in the instance where an entity other than a corporation (e.g., an individual) is in non-compliance.
Implementation of administrative penalties
Comment: A number of stakeholders expressed the need for contraventions to be categorized in the regulation and for clarification on how penalty values will be determined (e.g., multi-day penalties, etc.).
Response: The regulation includes a schedule that details the contraventions and their associated penalty ranges. A draft implementation guideline detailing how ministry staff will assess administrative penalties will be posted on the Environmental Registry for public review and comment.
Supporting materials
View materials in person
Some supporting materials may not be available online. If this is the case, you can request to view the materials in person.
Get in touch with the office listed below to find out if materials are available.
77 Wellesley Street West
Ferguson Block, 10th floor
Toronto,
ON
M7A 2T5
Canada
Connect with us
Contact
PJ Partington
77 Wellesley Street West
Ferguson Block, 10th floor
Toronto,
ON
M7A 2T5
Canada
Original proposal
Proposal details
Description of regulation
Climate change is a global problem that requires collective action.
In April 2015, the government announced it would be limiting greenhouse gas pollution by implementing a cap and trade program and its intent to link Ontario’s program with those of Quebec and California.
On May 19, 2016, two regulations that form the backbone of the cap and trade program became law under the Climate Change Mitigation and Low-carbon Economy Act, 2016 – the Cap and Trade Program Regulation (O. Reg. 144/16) which took effect July 1, 2016 and the Quantification, Reporting and Verification of Greenhouse Gas Emissions Regulation (O. Reg. 143/16) which took effect January 1, 2017.
Ontario’s cap and trade program came into effect on July 1, 2016, with the first compliance period beginning on January 1, 2017.
Ontario has previously indicated its intent to link its program with the program of California and Quebec. Economic modelling has shown that linking Ontario’s cap and trade program with California and Quebec will help Ontario meet its greenhouse gas emission reduction targets at the lowest cost.
Ontario is now putting forward a proposal to make a number of amendments to the existing cap and trade program regulations to provide for linking, set 2021-2030 caps and other amendments aimed at improving fair and equitable treatment amongst program participants. This includes administrative amendments to improve data reliability and program efficiency.
A new service of documents regulation under the Climate Change Mitigation and Low-carbon Economy Act, 2016 (CCMLEA) is being proposed to provide the regulated community with certainty and clarity as to how documents can be given or served under the Act.
Additionally, to help ensure compliance and maintain market integrity, a regulation is being proposed for administrative penalties that would apply to contraventions of the CCMLEA and its regulations. Implementation of administrative penalties will form part of the ministry’s suite of graduated compliance and enforcement tools under the CCMLEA – providing the ministry with the ability to choose the most appropriate and effective compliance tool, or combination of tools, to maximize compliance and prevent or deter future non-compliance. To ensure transparent and appropriate application of administrative penalties, the ministry will be developing guidance material to be used by the ministry when applying and calculating administrative penalties. The ministry intends on posting this draft guidance material on the Environmental Registry, for consultation, as part of the process of implementing any administrative penalties.
The following elements are included in the Proposed Amendments to the Cap and Trade and Reporting Regulations – September 2017 document that is posted (please refer to the link under the additional information).
The following changes are proposed:
Proposed Regulatory Amendments to the Quantification, Reporting and Verification of Greenhouse Gas Emissions Regulation (O. Reg. 143/16)
Changes being considered to the reporting regulation along with the incorporated Guideline include:
- Requiring reporters to submit verification reports.
Proposed Amendments to the Cap and Trade Program Regulation (O. Reg. 144/16)
Changes being considered to the Cap and Trade regulation along with the incorporated Methodology include:
- Establishing the 2021-2030 caps under the program.
- Recognizing compliance instruments from California and Quebec so these may be used to meet compliance obligations and to make them eligible for trading in the market by Ontario participants.
- Holding joint auctions for the sale of emission allowances with California and Quebec.
- Adjusting holding limits for allowances and credits, and purchase limits for allowances to account for the emissions cap of all three jurisdictions.
- Requiring related persons in Ontario to share holding and purchase limits with related persons in California and Quebec.
- Allowing registration in multiple jurisdictions for
- capped participants to ensure they are able to demonstrate compliance in all jurisdictions and
- offsets sponsors so they are eligible to receive recognition for offset initiatives undertaken in other jurisdictions.
- Require voluntary participants to register by September 1 of the year prior to the year they wish to assume the compliance obligations for their emissions.
- Change the deadline for submitting an application for free allowances to October 1.
- Change the deadline for transfer of allowances distributed free of charge for the second year following the compliance period (e.g., change from January 15, 2022 to October 25, 2021 for allocating allowances for 2022).
- Provide free allowances to capped facilities that are customers to the regional cogeneration system in the Sarnia area and possibly imposing a direct compliance obligation on them for emissions from natural gas used in the cogeneration system.
- Provide allowances free of charge for fixed process emissions to voluntary participants for which they have a compliance obligation.
Proposed Service of Documents Regulation
Ontario is proposing to develop a regulation under the CCMLEA that would provide clarity and certainty with regard to how documents can be given or served under the Act.
The following elements are included in the Proposed Administrative Penalties Regulation document that is posted (please refer to the link under the additional information).
Proposed Administrative Penalties Regulation
Ontario is proposing to develop a regulation under the CCMLEA that would establish a framework for issuing administrative penalties. The proposed regulation would govern the determination of the amount of, and the manner in which, the ministry will issue an order to pay an administrative penalty for non-compliance with the CCMLEA and its regulations, including:
- The framework and process for issuing administrative penalties
- The ranges of penalties and their maximum amounts
- The considerations that would be made when determining exact penalty values
- Potential reductions for actions taken to prevent and mitigate the contravention subject to the administrative penalty
Purpose of regulation
The cap and trade program is a key initiative for the government to fight climate change by reducing greenhouse gases. The program is intended to reduce the amount of greenhouse gas pollution going into the atmosphere by setting a limit (i.e., cap) on emissions from capped participants. Over time, the cap is lowered, reducing greenhouse gas pollution.
Linking with other cap and trade programs helps companies comply at the lowest possible cost, as well as helping jurisdictions meet their targets for reduced greenhouse gas emissions.
Extending the emission caps for the years 2021 to 2030 will help provide more certainty to both the regulated community and the market, and will allow the government to continue offering advance auctions in 2018.
A new service of documents regulation and other technical and administrative amendments, will provide the regulated community with certainty and clarity as to how documents can be given or served, and improve accuracy and program efficiency, respectively. A new administrative penalties regulation will allow the ministry to issue an order to pay an administrative penalty as part of its graduated compliance and enforcement toolkit. This is expected to achieve the following purposes, as stated in the CCMLEA:
- Ensuring compliance with the CCMLEA and its regulations
- Preventing entities from gaining an economic benefit from non-compliance.
Other information
Ontario has been engaging with Indigenous communities on a variety of topics related to climate change and recognizes the additional challenges as they relate to off-grid First Nations reserve communities.
- Ontario is aware that certain off-grid First Nations communities serviced by Independent Power Authorities (IPAs) currently rely on diesel generation and that alternative low carbon energy sources are not immediately accessible.
- To understand and address the potential impacts on First Nations, MOECC will continue engaging with communities regarding potential options for reducing GHGs from future electricity generation, additional to existing grid connection and micro-grid commitments.
Other Information
Public consultation
This proposal was posted for a 45 day public review and comment period starting September 22, 2017. Comments were to be received by November 06, 2017.
All comments received during the comment period are being considered as part of the decision-making process by the Ministry.
Please Note: All comments and submissions received have become part of the public record.
Other public consultation opportunities
Implementation of Administrative Penalties
As part of the process of implementing administrative penalties, and to ensure appropriate and transparent application, the ministry intends on posting, on the Environmental Registry for consultation purposes, draft guidance material to be used by the ministry when applying and calculating any administrative penalties.
Regulatory impact statement
The cap and trade program is a key initiative the government is pursuing to tackle climate change by reducing greenhouse gases. The program will reduce the amount of greenhouse gas pollution going into the atmosphere by setting a limit (i.e., cap) on emissions from covered facilities. Covered facilities will be required to participate in the cap and trade program, either reducing their greenhouse gas emissions or meeting their compliance obligation through use of other tools, according to their regulatory requirements.
Only those businesses that are not in compliance with the requirements of the CCMLEA and its regulations may be subject to an administrative penalty and any associated costs, should the ministry decide to issue one. As a result, those businesses that are in compliance with legal requirements would not have any additional costs or impacts associated with this regulatory proposal. Given that the ministry may undertake a graduated response to non-compliance, depending on the circumstances of the contravention, compliance may be achieved using a number of tools, including an order to pay an administrative penalty.
Supporting materials
View materials in person
Some supporting materials may not be available online. If this is the case, you can request to view the materials in person.
Get in touch with the office listed below to find out if materials are available.
77 Wellesley Street West
Ferguson Block, 10th floor
Toronto,
ON
M7A 2T5
Canada
Comment
Commenting is now closed.
This consultation was open from September 22, 2017
to November 6, 2017
Connect with us
Contact
PJ Partington
77 Wellesley Street West
Ferguson Block, 10th floor
Toronto,
ON
M7A 2T5
Canada
Comments received
Through the registry
6By email
0By mail
22