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What You Need to Know About Ontario's New Cap & Trade Program

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On July 1, Ontario – Canada’s most populous province and responsible for 23 percent of Canada’s total greenhouse gas emissions (GHG) emissions – launched a new Cap and Trade program as part of a larger climate change initiative. 

Ontario’s Climate Change Action Plan includes 28 key initiatives and is one of North America’s most ambitious carbon reduction plans. The plan calls for an emissions reduction of 15 percent by 2020 and 80 percent by 2050, relative to a baseline of 1990 emissions. Cap and trade is a key feature of the Climate Change Action Plan.

Source: Ontario Climate Change Action Plan

Since phasing out coal earlier this decade, GHG emissions from the electricity sector in Ontario are projected to be 80 percent lower in 2020 than they were in 1990. However, these reductions have come at a cost as the price of electricity for time of use (TOU) and tiered customers have more than doubled since 2008. The Global Adjustment, which covers the cost of contracted generation and various conservation programs, is over C$6 billion (about $4.6B USD) in the first half of 2016.

In the first year of the program, there will be an economy-wide cap of 142 million tonnes (MT), before declining to 125 MT by 2020. Companies can comply by investing in clean energy technologies, burning less fossil fuels, or purchasing additional credits. Ontario intends to link its program with California and Quebec which will simplify administration, harmonize carbon prices across a number of jurisdictions, and reduce implementation costs. 

How will the new program potentially impact customers? 

Consumers will most likely be affected through higher gasoline and natural gas prices. The impact to the electricity sector is not expected to be as significant since the sector already has low emissions intensity. Gasoline is expected to increase by C4.3 cents per liter (8.6 cents per gallon). Monthly increases for natural gas are expected to be C$5/month, or about C$0.57/GJ ($0.46/MMbtu).

Learn more about Ontario's Climate Change Action Plan. Don't forget to subscribe to the Direct Energy Business Blog for the latest policy and regulatory updates. 

Posted: July 21, 2016