On 1 January 2017, Ontario launched its emissions trading system, establishing the fourth sub-national system in North America. As a member of the Western Climate Initiative, Ontario’s system closely resembles the existing systems of California and Québec and Ontario policy makers seek to link their system to these systems in 2018. Thus, the system covers most sectors of the economy (e.g. electricity, transportation, heating, industrial sector) and will use auctioning with a reserve price aligned with California’s and Québec’s reserve prices to release allowances into the market (USD 13.57 and CAD 13.56 in 2017, respectively).

Initially,
most large final emitters will receive free allowances; however the share of free allowances will decrease over time. In the first compliance period, from 2017 to 2020, the initial total cap of 142m tCO2e will be reduced by 4.2% annually.

The program is part of Ontario’s
climate change strategy and helps to achieve the goals of emission reductions of 15% and 37% compared to 1990 levels by 2020 and 2030, respectively.