Climate Change Mitigation and Low-carbon Economy Act, 2016, S.O. 2016, c. 7 - Bill 172

• Jurisdiction: Ontario
• Bill Number: 172
• Date: 18 May 2016

EXPLANATORY NOTE

This Explanatory Note was written as a reader’s aid to Bill 172 and does not form part of the law. Bill 172 has been enacted as Chapter 7 of the Statutes of Ontario, 2016.

The Bill enacts the Climate Change Mitigation and Low-carbon Economy Act, 2016. The purpose of the Act is set out in section 2. Here are some highlights of the Act.

Targets are established for the reduction of greenhouse gas emissions. The Ontario Government is required to prepare a climate change action plan, setting out actions that will enable Ontario to achieve the targets. The action plan must consider the impact of the regulatory scheme established by the Act on low-income households and must assist those households with Ontario’s transition to a low-carbon economy. The Minister of the Environment and Climate Change is required to prepare periodic progress reports with respect to the action plan. (See sections 6 to 8 of the Act.)

The Act requires certain persons to quantify the greenhouse gas emissions associated with their activities, to report about those emissions, and to verify their reports. Regulations will contain the details of who is required to do each of these things, and will specify how and when they are to be done. (See sections 9 to 11 and 40 of the Act.) Regulations will also govern how greenhouse gas emissions are to be attributed to those persons for the purposes of the Act. (See section 13 of the Act.)

A framework for Ontario’s cap and trade program is established.

Participants: The Act provides for three categories of participants in the cap and trade program: mandatory participants, voluntary participants and market participants. Participants must be registered, and must comply with the conditions of their registration. Regulations will contain the details of who is required to register and who is permitted to apply for registration. (See sections 15 to 20 of the Act.)

Ontario emission allowances: The Minister is authorized to create emission allowances and distribute them to registered participants for valuable consideration. Emission allowances may also be distributed free of charge in order to support the transition to a low-carbon economy. Restrictions may be established by regulation. Regulations will establish rules governing the auctioning or sale of emission allowances by the Minister. In prescribed circumstances, the Minister may retire emission allowances from circulation and may cancel them. (See sections 30 to 33 of the Act.)

Ontario credits: The Minister is authorized to create credits and issue them to registered participants. Restrictions may be established by regulation. An application may be made to register an offset initiative. An application may also be made for the creation of offset credits in connection with a registered offset initiative. In prescribed circumstances, the Minister may retire credits from circulation and may cancel them. Restrictions may be established by regulation. (See sections 34 to 37 of the Act.)

The “cap” in cap and trade: Mandatory participants and voluntary participants are required to submit emission allowances and credits to the Minister periodically in connection with greenhouse gas emissions. In general terms, a participant is required to submit emission allowances and credits in an amount equal to the amount of the greenhouse gas emissions attributed to the participant for a compliance period. Regulations will contain the details of how the amount to be submitted is determined and will specify the classes of allowances and credits that can or must be submitted and how and when the submission must be made. The consequences of failing to submit the required emission allowances and credits in accordance with the regulations are set out. (See section 14 of the Act.)

The “trade” in cap and trade: Only registered participants are eligible to purchase, sell, trade or otherwise deal with Ontario emission allowances and Ontario credits. (See section 21 of the Act.) Restrictions affecting transactions by registered participants, such as purchase limits and holding limits, may be established by regulation. (See subsection 22 (2) of the Act.) Prohibitions are set out, including a prohibition against fraud and market manipulation and a prohibition against holding an emission allowance or credit that is owned, directly or indirectly, by another person. (See sections 21, 28 and 29 of the Act.)

Registered participants’ cap and trade accounts: One or more cap and trade accounts are to be established for each registered participant, for the purpose of allowing the participant to purchase, sell, trade and otherwise deal with emission allowances and credits and to submit them to the Minister. Provision is made for a registered participant to designate one or more recognized account agents. The authority of a registered participant over its accounts may be suspended, and then reinstated, in prescribed circumstances. A participant’s accounts may be closed in prescribed circumstances. The authority of the Minister and the Director to remove emission allowances and credits from a participant’s accounts is set out. (See sections 22 to 27 of the Act.)

The role of other jurisdictions: The Minister is authorized to enter into agreements with other jurisdictions for the harmonization and integration of the cap and trade program under this Act with corresponding programs of those jurisdictions. (See section 76 of the Act.) The regulations may provide for the recognition of instruments created by such a jurisdiction, giving them the status of emission allowances or credits that can be submitted to the Minister under this Act. (See section 38 of the Act.)

Payments from the Consolidated Revenue Fund: An account called the Greenhouse Gas Reduction Account is established in the Public Accounts. The proceeds from the distribution of emission allowances by the Minister, and other specified amounts, are to be recorded in the Account. Costs relating to initiatives that are reasonably likely to reduce, or support the reduction of, greenhouse gas may be paid out of the Consolidated Revenue Fund in an amount not exceeding the balance in the Account. Funding from the Account is also authorized for other specified purposes. (See section 71 of the Act and Schedule 1 to the Act.)

A consequential amendment is made to the Environmental Protection Act.

chapter 7

An Act respecting greenhouse gas

Assented to May 18, 2016

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Preamble

Human-induced climate change is real and impacts are being experienced around the globe. The Intergovernmental Panel on Climate Change has concluded that warming of the climate is unequivocal and that most of the observed increase in global average temperature is due to human activity.

To prevent dangerous climate change, the global community has identified the objectives of holding the increase in the global average temperature to well below 2 degrees Celsius above pre-industrial temperatures and pursuing efforts to limit the temperature increase to 1.5 degrees Celsius above pre-industrial temperatures. A rise beyond 2 degrees Celsius poses the very real risk that countries around the world will experience irreversible damage to their environment. Such a rise in temperature poses a risk of irreversible widespread impacts on human and natural systems and threatens Ontario’s agricultural resources, natural areas and ecosystems, and economic well-being.

This risk justifies action to mitigate climate change, including reducing greenhouse gas that causes climate change. The global community is mobilizing around this goal through the United Nations Framework Convention on Climate Change and its related agreements, and Ontario is committed to playing its part.

By taking action now, Ontario’s households and communities, infrastructure, agricultural resources, natural areas and ecosystems, including the Great Lakes and the boreal forest, will be better protected for the benefit and enjoyment of all. Ontario will also be well positioned to take advantage of the low-carbon economy through local job creation, an expanding low-carbon technology sector and other global economic opportunities.

All Ontarians have a role to play in addressing climate change, including understanding how Ontarians contribute to greenhouse gas emissions and changing their behaviour to reduce those emissions.

The Government of Ontario believes that the public interest requires a broad effort to reduce greenhouse gas and to build a cleaner and more prosperous Province. The Government will continue to involve and engage individuals, businesses, communities, municipalities, non-governmental organizations and First Nation and Métis communities in the ultimate goal of fostering a high-productivity low-carbon economy and society in Ontario.

First Nation and Métis communities have a special relationship with the environment and are deeply connected spiritually and culturally to the land, water, air and animals. They may offer their traditional ecological knowledge as the Government of Ontario develops specific actions.

The Government of Ontario cannot address this challenge alone. Collective action is required. As a leading sub-national jurisdiction, Ontario will participate in the international response to reduce greenhouse gas by establishing a carbon price. A key purpose of this Act is to establish a broad carbon price through a cap and trade program that will change the behaviour of everyone across the Province, including spurring low-carbon innovation. A cap and trade program in Ontario will allow Ontario to link to other regional cap and trade markets as part of the international, national and interprovincial responses to reduce greenhouse gas.

In addition to the carbon price signal and to further support the reduction of greenhouse gas, the Government of Ontario will pursue complementary actions to support and promote the transition...