In April 2015, Ontario announced its intention to join the cap-and-trade system under the Western Climate Initiative, partnering with other jurisdictions, including Quebec and California, and making carbon pricing a cornerstone in Ontario’s fight against climate change.
Cap-and-trade, which began in California in January 2012, places a cap on emissions from industries in California, and then auctions off emission “credits” to companies that pollute, thus creating billions of dollars that can be invested in further greenhouse gases reductions.
But that has not been very successful. For the second time in a row, a joint cap-and-trade auction held by California and Quebec has failed to sell most of the emissions allowances on offer. It leaves the two governments hundreds of millions of dollars short on revenue projections, and nobody can say for certain why the auctions are failing.
The cap-and-trade program Ontario’s set to start on January 1, 2017, could mean Ontario’s much-heralded $8.3-billion Climate Change Action Plan has far less money to spend in reality.
Cap-and-trade allows the market, not government, to set the carbon price. The market ensures the price meets the needs of businesses covered by the program.
Cap-and-trade fights climate change by giving polluters an incentive to cut emissions, since they must pay for the pollution they are responsible for. It gives companies certainty and predictability, and enables them to find new ways to reduce their carbon footprints such as investing in new clean technologies.
The “cap” sets a maximum limit on the amount of greenhouse gas pollution that regulated emitters collectively can produce. Each year, the cap is lowered, requiring industry and other greenhouse gas polluters, such as natural gas distributors and other fuel suppliers, to reduce their emissions.
The “trade” refers to a market where companies can buy or sell “allowances,” or pay others to reduce emissions on their behalf, in order to comply with the cap in the cheapest and most efficient way
Things to know about Ontario’s Climate Change Action Plan
It’s all very confusing. I listened to the Hon. Glen Murray, Minister of the Environment and Climate Change, at the recent OFA annual meeting. Here are the facts: There is no ban on natural gas for heating, but Ontario will spend up to $600 million to help homeowners install low-carbon technologies such as geothermal and heat pump systems, solar thermal and solar generation systems for heating homes and water. Another $400 million will be used to get rid of old wood stoves, targeting northern, rural and First Nations communities, and encouraging them to switch to new high-efficiency wood stoves. There will be up to $220 million in rebates for people who buy or build their own near net-zero carbon emission homes. Up to $1.3 billion will be used to offset the cost of climate change initiatives on residential and industrial electricity bills. There will be up to $250 million to pay for free energy audits for pre-sale homes, which will be required before a new or existing single-family home can be listed for sale
Ontario businesses will be sending hundreds of millions of dollars annually to California.
Cap-and-trade is set to start in Ontario on Jan. 1, 2017 with businesses buying allowances from the government to cover their emissions. Each year, the overall limit on emissions is reduced.
In 2018, Ontario will link its market to California and Quebec. But California’s market is currently awash in allowances that haven’t been selling out in the quarterly auctions, meaning they’re available for cheap when Ontario links up.
Climate change? You could say it keeps changing!
