ON: Ontario cap and trade cancellation update

On July 25, Minister of the Environment, Conservation and Parks Rod Phillips announced details of legislation that would, if passed, formally end the cap-and-trade carbon tax era in Ontario. To ensure CPA are given the most up-to-date and accurate information, the CPA has monitored this issue closely and has engaged with the Ontario government. 

Timeline and summary

• July 3 - The government revoked the cap and trade regulations and filed new regulations prohibiting against the purchase, sale and other dealings with emission allowances and credits.
• July 10 - The government announced its intentions to introduce legislation upon the resumption of the legislature.
• July 25 - The government introduced the Cap and Trade Cancellation Act, 2018 which, if passed, would repeal the Climate Change Mitigation and Low-Carbon Economy Act, 2016 (CCMLE Act) setting out the legal framework for the wind-down, including the compensation framework. Furthermore, the proposed legislation requires the government to prepare and publish a climate change plan and to set targets for reducing the amount of greenhouse gas emissions in Ontario.
• July 26 - CPA communicated with Rick Roth, Chief of Staff to Minister Rod Phillips regarding the CPA’s involvement in the next phase of Ontario government stakeholder consultations.
• July 27 - CPA participated in an Ontario Cap and Trade webinar for stakeholders to obtain more details on the government’s plan and intended approach to wind down the program.
• July 30 -  CPA President and CEO Nathalie St-Pierre wrote to Premier Ford and Minister Phillips on behalf of members to request a meeting regarding the proposed legislation to formally end the cap and trade program.

Overview – Cap and Trade Cancellation Act, 2018

• The proposed Bill sets out the legal framework for the wind down.
• If passed, the Bill would include:
  1. Repealing the CCMLE Act,
  2. Retirement and cancellation of instruments (i.e., allowances and credits),
  3. Compensation framework,
  4. Immunizing the crown from civil liability,
  5. Requirement for the government to set greenhouse gas emissions reduction targets,
  6. Requirement for the minister to prepare a climate change plan, and
  7. Addressing proceeds credited to the Greenhouse Gas Reduction Account (government account where cap and trade auction proceeds were directed).

Repealing the CCMLE Act

• To be repealed on a date to be proclaimed where underlying regulations would be effectively revoked:
  
  • Ontario Offset Credits – O.Reg.539/17
  • Administrative Penalties – O.Reg.540/17
• Service of Documents – O.Reg.451/17
• Prohibition Emission Allowance and Credits – O-Reg.386/18
• Regulation revoking the Quantification, Reporting and Verification of GHGs – O.Reg.143/16:
  
  • GHG reporting would be transitioned to the Environmental Protection Act through new O.Reg.389/18 filed on July 25, 2018 with an effective date of August 1, 2018. 

Reporting Regulation O.Reg.389/18

• The government replaced the existing greenhouse gas reporting regulation with a new reporting regulation under the Environmental Protection Act in order to support the orderly wind down of the program.
• The new regulation would require the same greenhouse gas emission reporting and verification as the previous regulation but with the following changes:
  
  • Inclusion of a mid-year 2018 GHG emissions report
    
    • This will be used in the process of matching allowances with verified emissions to complete the wind down of the cap and trade program; and
    • Includes amendments that support the orderly wind-down.
  • Current reporting regulation O.Reg.143/16 would be revoked to avoid duplication.

(Market participants will not be required to purchase any emission allowances or offset credits)

Key summary

• Mid-year 2018 GHG emissions report will cover: January 1, 2018 – July 3, 2018
  
  • Reporting deadline: October 1, 2018
  • Verified report deadline: December 1, 2018
• All capped emitters will need to comply by January 1, 2019
• Compensation framework will depend upon verified emissions report compared to the number of allowances rather than a flat amount
• Future vintage allowances purchased (2019-2020) will be compensated (2021 will not be included)
• Not all will be compensated (e.g., if you had the opportunity to pass cost down to the customer)
• Wind-down costs will include potential compensation costs
• The proposed Bill will require the minister of the environment, conservation and parks to prepare and publish a new Ontario climate change plan  

Next steps

The CPA intends on being an active participant in the next phase of Ontario Government cap and trade stakeholder discussions and consultations. The CPA will continue to monitor, gather information and provide members with additional details as they become available.

For more information, please contact Regional Director, Government Relations (Ontario) Hando Kang at 647.881.1483 or handokang@propane.ca.