Ontario puts price on carbon, aims to link system to Quebec and California

Ilario D'Amato
Reading time: 4 minutes
13 April 2015

NEW YORK: The Canadian province of Ontario has just launched a ‘cap-and-trade’ system to curb its greenhouse gases (GHG) emissions. The system also aims to be linked to the joint Emission Trading Scheme (ETS) Québec and California launched last year, the largest regional carbon market in North America.

The three regions are all part of The Climate Group States & Regions Alliance, a program that brings together sub-national government leaders from around the world in a powerful, high-profile network to share expertise, demonstrate impacts and influence the international climate dialogue.

“This is a really exciting move for carbon markets in North America,” underlines Libby FergusonStates & Regions Director at The Climate Group. “This Canadian province is taking bold, practical measures to combat climate change and is ensuring its future prosperity and low-carbon growth path. We salute their leadership and are proud that Ontario is a member of our States & Regions Alliance.”

“Ontario’s announcement today will help us meet our ambitious GHG targets and work with other jurisdictions,” says Glen MurrayOntario’s Minister of the Environment and Climate Change, “to ensure we protect our environment for future generations as we develop a comprehensive climate change strategy to be released later this year. Fighting greenhouse gas pollution through a cap and trade system will also help us position Ontario's economy to seize the vast opportunities of a low-carbon future."

The new carbon market covers more than 75% of Canada’s population, and is expected to raise US$1-2 billion per year – which will be reinvested in projects aimed to reduce emissions and helping businesses. Ontario, Québec and California are working to desing a joint system, whose details will be released this fall prior to the Conference of the Parties (COP) in Paris this December.

“Climate change is a problem that is both critically important and urgent” says Kathleen Wynne, Premier of Ontario. “It is causing extreme weather events, which can increase insurance costs, hurt wildlife, damage our environment and affect farming.

“Climate change needs to be fought around the globe and it needs to be fought here in Canada and Ontario. The action we are taking today will help secure a healthier environment, a more competitive economy and a better future for our children and grandchildren.”

Putting a price on pollution

Emissions trading is a regulatory economic mechanism set to limit - or ‘cap’- emissions of pollutants by the firms operating in that territory with a ‘carbon price’. Every company has a certain amount of free allowances relating to its needs, and can ‘trade’ these permits in a central market. If a company needs to emit more pollutants, it can buy allowances from those which haven't used them at all – because they have been able to reduce their emissions.

Unlike a ‘carbon tax’, this system is regulated by the market. The final goal is to incentivize firms to be far below this limit, achieving a double result: avoiding buying new allowances, and also selling their own. Moreover, the total number of permits – the volume of pollutants every firm can emit in the air – is lowered over time, bringing a total reduction of emissions while achieving greater energy efficiency.

Ontario already has the fastest growing clean tech sector in Canada, with 2,700 clean tech firms employing 65,000 people and generating annual revenues of more than US$8 billion. The province is also the first industrial region in North America to eliminate coal-fired power, while heavily investing in clean technologies.

According to a study by the Canadian Medical Association, air pollution costs US$4 billion per year to the province, and is “responsible for lost worker productivity, increased health-care costs, reduced quality of life and loss of life”. But thanks to its climate commitments, today Ontario’s GHG emissions are 6% below 1990 levels. Its bold policies include the Green Energy and Economy Act, which will enable the province to generate a quarter of its electricity from solar and wind power and has already created more than 20,000 jobs, with 30,000 more expected in the near future.

The province will also host a Climate Summit of the Americas from July 7-9, 2015, to advance collaborative action on climate change ahead of the COP21 in Paris. The Summit will also highlight the successes of The Climate Group States & Regions Alliance, where the leadership shown by sub-national governments highlights their crucial role in driving impactful climate action.

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by Ilario D'Amato

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