P. Jason Kroft and Tamir Birk -
As recently reported to the Globe and Mail newspaper by government sources, Ontario Premier Kathleen Wynne is preparing to implement a cap-and-trade system for greenhouse gas emissions as part of the Province’s strategy to combat climate change. The initiative would be tied to Quebec and California’s existing cap-and-trade system, which held its first joint auction of greenhouse gas allowances in December, 2014, and its second in March, 2015. An official announcement is expected by Ontario Environment Minister Glen Murray in the near future, with further details to come later this spring and summer.
Under a cap-and-trade system, Ontario would limit the amount of carbon that can be emitted by certain businesses and raise money by selling or auctioning emissions permits that represent the right to emit a specific volume of carbon. Permits are then traded on secondary markets. Companies that wish or need to emit more carbon than the regulated cap or than the permits they then hold must purchase permits from other companies that plan to emit less than the limit. Proponents of a cap-and-trade system will note that forward looking businesses can adopt cleaner or more efficient energy uses and thus profit under a cap-and-trade system by holding excess emissions permits that are available for sale. Under the current joint Quebec-California program, companies are able to trade carbon allowances across jurisdictions to comply with local greenhouse gas emission limits. A Quebec company, for example, could purchase allowances from a certified greenhouse gas emissions reduction project in California in order to comply with its own Quebec provincial targets, and vice versa. Initial estimates indicate that a cap-and-trade system in Ontario could raise between $1 billion and $2 billion per year which would then likely be invested in green programs.