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Ontario's Cap and Trade Program - Regulatory Overview of O. Reg. 144/16 and O. Reg 143/16

     Posted by LEHDER News on

ON Cap and Trade RegulationsOn May 19th the MOECC passed two new regulations which introduced the cap and trade program in Ontario. These two regulations, which were passed under the Climate Change Mitigation and Low-carbon Economy Act, are O. Reg. 143/16 and O. Reg. 144/16.

The Cap and Trade Program comes into effect on July 1, 2016 and acts as the framework for execution of the Cap and Trade Program in Ontario. Its purpose is to outline aspects such as registration of activities, the Program’s distribution of free allowances, and the rules that govern the auction process.  O. Reg. 144/16 The Cap and Trade Program Regulation also addresses:

  • Strategic reserve of allowances;

  • Allocation methodology;

  • Holding limits;

  • Buying credits; and

  • Market rules.

A methodology document, Methodology for the Distribution of Ontario Emission Allowances Free of Charge, dated May 16, 2016 was also released to support this Regulation. A copy of this document is provided below. 

O. Reg. 144/16 Guidance Document O. Reg. 144/16 Guidance Document (308 KB)

The cap covers approximately 82% of province-wide GHG emissions.  The majority of the GHG emissions not covered under this Program are from fugitive, agriculture, and waste management GHG sources. 

The second Regulation introduced is O. Reg. 143/16 - Quantification, Reporting and Verification of Greenhouse Gas Emissions.   This Regulation replaces the current O. Reg. 452/09 for the reporting of greenhouse gas emissions in Ontario and comes into effect on January 1, 2017.

This new regulation does not introduce any substantial policy changes from the existing reporting requirements under O. Reg. 452 however, some refinements have been made.  The newest guideline providing the reporting details to support this Regulation, titled Guideline for Quantification, Reporting and Verification of Greenhouse Gas Emissions Effective January 2017 was issued on May 17, 2016.  A copy of this document is provided below.

O. Reg. 143/16 Guidance Document O. Reg. 143/16 Guidance Document (1481 KB)

A facility is required to register under O. Reg. 144/16 as a mandatory participant if the O. Reg. 452 reporting threshold of >25,000 tonnes CO2 equivalent (CO2e) was met for the 2015 reporting year.  O. Reg. 143/16 allows facilities emitting between 10,000 – 25,000 CO2e to opt-in to the program as voluntary participants.  If required to register as a mandatory participant, the registration deadline is November 30, 2016. In subsequent years, the deadline for registration varies dependent upon several factors.  Please refer to Part IV, sections 21-24 of the Regulation for further information. The first compliance period of the Program is 2017-2020.

The application for allowances under O. Reg. 144/16 is due September 1 of each year. The MOECC will provide training in regards to registering for the Program and how to apply for allowances before this date.  Information regarding the allowances allotted and what can be offered for auction is expected to be provided by the end of 2016.

The process of applying for free allowances will occur each year however, the available free allowances will be on a sliding cap, which for combustion emission sources (without biomass adjustment) will decrease at a rate of 4.57% yearly. The purpose of this cap decline is to require facilities to gradually reduce GHG emissions, purchase allowances from the government or seek allowances or credits on the carbon market.

Free allowances provided to emitters will be distributed in different ways based upon the processes involved.  The current guidance provides five methodologies for determining allocations of free allowances.  A facility may employ more than one methodology. The preferred method employs product output benchmarks which will be used for industries/activities listed in Tables 1a/b/c of the O. Reg. 143/16 Guidance document. Energy use-based methods, historical data and allowances based upon previous annual emissions are other methods which can be used to calculate allowances. There will also be allowances for those that buy steam as a method of offsetting the upstream costs that cap and trade will introduce.

Quick Links

For additional information please refer to the Regulations and guidance materials provided below:

O. Reg. 144/16 The Cap and Trade Regulation

O. Reg. 143/16 - Quantification, Reporting and Verification of Greenhouse Gas Emissions

O. Reg. 143/16 Guidance Document O. Reg. 143/16 Guidance Document (1481 KB)

O. Reg. 144/16 Guidance Document O. Reg. 144/16 Guidance Document (308 KB)

For more information in regards to the Cap and Trade Program Regulations and Guidance documents, please contact Marnie Freer.