Ontario introduces formal legislation to repeal cap-and-trade, outlines program wind down
Following Ontario Premier Douglas Ford’s repeal of the province’s cap-and-trade legislation on 3 July, his administration called a summer session on 25 July to introduce the Cap and Trade Cancellation Act, 2018. However, it is not clear whether the bill will be passed in the session. The bill outlines the steps to be taken in winding down the province’s cap-and-trade program and addresses the issue of compensation. It also formally revokes the Climate Change Mitigation and Low-carbon Economy Act, 2016, the broader legislation mandating Ontario’s climate targets and outlining the framework of Ontario’s climate policy.
If the bill is passed, Ontario allowances will largely be retired without compensation in a process comparable to using them for compliance. CAD 5 million (of the total estimated CAD 2.9 billion raised in Ontario during auctioning) has been earmarked to compensate participants for their allowances if they can prove that their accumulated costs exceed the direct costs of complying with the ETS legislation. According to the bill, a covered entity could be compensated for any excess allowances that were neither allocated freely nor purchased for the post-2020 compliance cycle. However, neither entities that passed costs down to consumers (i.e., natural gas and petroleum suppliers), nor entities beyond mandatory regulated entities (e.g. opt-in facilities, speculators) will be compensated.
Furthermore, the bill would protect Ontario from liability by stating that no person is entitled to compensation for lost revenue resulting from the government’s decision to terminate the program. The province’s financial accountability office is investigating how much the cancellation of the cap-and-trade program will cost the province, including the cancellation cost of the CAD 2.9 billion in allowances sold.
The bill stipulates that the government is to establish emissions reduction targets and an overall climate change plan, however no timeline is provided. Ontario will also have to deal with the issue of the federal carbon tax, which will be implemented in 2019. However, Premier Ford has also stated that he and Saskatchewan Premier Scott Moe will contest the federal government’s authority to impose such a tax.