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On 4 February 2019, the Ontario government published a new regulation laying out the compensation value for unusable allowances from the now dismantled cap-and-trade program. The regulation specifies provisions of the Cap and Trade Cancellation Act of 31 October of last year, which formally repealed the province’s ETS. While the law had set out a general reimbursement structure for Ontario allowances and offsets, the specific amount that entities would receive for excess units (i.e. any additional allowances above aggregate emissions at the time the program was revoked on 3 July 2018) had not been determined.
The new regulation stipulates that eligible participants are entitled to receive CAD 18.32 (USD 13.82) per unused allowance or offset. This value was determined based on the average allowance price over the auctions that Ontario participated in from March 2017 to May 2018. Entities that have received free allocation can also receive more compensation than their expenditures for purchased allowances if they were producing with lower emissions intensity than the benchmarks defining free allocation. Fuel distributors are exempt from the compensation scheme as it is assumed that they passed on their carbon costs to consumers.