Participating In Cap And Trade
What Cap and Trade is
Cap and Trade is a market-based system for managing and reducing industrial greenhouse gas (GHG) emissions.
In a cap-and-trade system, government sets a yearly cap which limits the amount of greenhouse gases emitted. The cap is based on one-tonne units called “allowances” which are distributed to the covered facilities. Facilities that emit more than the number of allowances they own must buy more allowances in the market.
Facilities that emit less can either sell their excess allowances in the market or bank them for future use. Over time, the total cap is lowered, reducing overall emissions.
What Ontario is doing
Many jurisdictions around the world have already established, or are in the process of developing, GHG cap-and-trade programs. Ontario also recognizes that a cap-and-trade program can provide flexibility to industry while reducing admissions at a low cost.
That’s why Ontario is working with other provinces and U.S. states through the Western Climate Initiative (WCI) to design a cap-and-trade system that will support the transition to a low-carbon economy and inform a broader, North American approach.
WCI is a commitment by four Canadian provinces (British Columbia, Manitoba, Quebec, Ontario) and seven U.S. states (Arizona, California, New Mexico, Oregon, Washington, Utah, Montana) to work together to identify, evaluate and implement policies that tackle climate change at a regional level. This work includes designing a broad-based GHG cap-and-trade system.
In December 2009, Ontario laid the foundation for a cap-and-trade system through enabling two pieces of legislation that require facilities to report greenhouse gas emissions:
- The Environmental Protection Amendment Act (Greenhouse Gas Emissions Trading) 2009
- Ontario Regulation 452/09 – requiring affected facilities to report greenhouse gas emissions.
Ontario has released two discussion papers for public comment on key design elements of a cap-and-trade system and continues to work with stakeholders and the public to develop a cap-and-trade system that works for Ontario and keeps its industry competitive.
Learn More
The Western Climate Initiative (WCI) has released a document that identifies compliance instrument tracking system technical requirements that are common and applicable to WCI jurisdictions.
