P. Jason Kroft and Tamir Birk -
As we recently discussed here, on April 13, 2015, Ontario Premier Kathleen Wynne formally announced plans to create a cap-and-trade system for greenhouse gas emissions in Ontario, to be linked with the systems already in place in Quebec and California. This is not the first time Ontario’s government has announced intentions to implement cap-and-trade in the province; prior efforts have lacked the political will and determination to bring cap-and-trade to fruition. In this blog post, we highlight some of the major recent cap-and-trade developments in Ontario and the U.S. to help put the re-launching of the province’s cap-and-trade efforts in context.
The Acid Rain Program (ARP), established under Title IV of the 1990 Clean Air Act (CAA) Amendments, was the first federal U.S. law to adopt an emission trading system on a large scale and was a precursor to a similar regime that was established in Ontario shortly thereafter. The ARP was a market-based initiative taken by the United States Environmental Protection Agency (EPA) beginning in 1995 to reduce atmospheric levels of sulfur dioxide (SOx) and nitrogen oxide (NOx), the primary precursors of acid rain, from the power sector. The program set a permanent cap on the total amount of SOx that may be emitted by electric power plants in the country, with allowances being bought and sold in secondary markets. Reductions in NOx emissions were also required and were mainly achieved through retrofits to coal-fired plants. The program was largely hailed as a success, significantly reducing SOx and NOx emissions in the U.S. In Ontario, the first air emissions trading program was introduced in 2001. The program includes the Emissions Trading Code, which was intended to supplement Ontario Regulation 397/01, which governs emissions trading under the Ontario Environmental Protection Act. The program introduced the use of a market-based system for reducing emissions of NOx and SOx in the province.