Following through on an election promise, Ontario’s Premier-designate Douglas Ford on 15 June 2018 reaffirmed his intention to withdraw Ontario from the joint carbon market with California and Québec and to terminate the cap-and-trade program his predecessor had implemented in 2017. He justified his move by stating the system would do nothing for the environment but only impose costs on Ontarian families. His election program contains the promise to establish an emissions-reductions fund instead to advance innovative technologies and reduce emissions in Ontario.

In line with this intention, it was announced that Ontario would not take part in the next allowance auction that was scheduled to take place together with California and Québec in August (Joint Auction Notice, available here). As a reaction, the Western Climate Initiative Inc., the corporation tasked to administer the program, has implemented changes that make trading between entities registered in Ontario and entities registered in California and Québec impossible. This will prevent an inflow of allowances held by Ontario entities in the event that they become unnecessary for compliance in Ontario.  While Douglas Ford has promised an “orderly” exit, the details of Ontario’s exit plan are currently unknown. However, the cancelling of auction participation this August indicates that a swift exit is possible.

As the Canadian federal government has mandated for all provinces to establish carbon pricing by 2019, the termination of the cap-and-trade program would lead to the implementation of a federal back-stop measure in Ontario in the form of a carbon tax levied on fossil fuels combined with an intensity-based trading scheme for emissions-intensive industries. However, Premier-designate Ford has promised to resist the implementation of this policy and to sue the federal government questioning its authority to implement such a scheme.