Ontario Inches Towards Carbon Pricing, Explores Ag And Forestry Offsets

12 February 2014 | Ontario officials have been hinting for weeks that they would be putting forth an ambitious climate plan that will include a carbon pricing program. Today, regulators released a discussion paper that seeks advice on the type of program to be implemented, but makes clear that carbon pricing will be coming to the Canadian province in some format.

Ontario has a long-term target of reducing greenhouse gas (GHG) emissions by 80% from 1990 levels by 2050 and is currently working with British Columbia, California and Québec to establish new interim targets. While the province emits less than 1% of total global emissions, it is one of the largest per capita GHG emitters in the world, the paper noted. The transportation sector is the largest emitter in the Ontario, followed by industrials such as cement and chemical manufacturers.

This spring, the province will confirm the market mechanism or mechanisms that will be used to price carbon in the jurisdiction. In the meantime, stakeholders have 45 days to offer their opinions on the best mechanisms for achieving its emissions reduction goals, according to the paper released by Ontario’s Ministry of the Environment and Climate Change.

“It is clear that carbon pricing is a climate-critical policy that will be driving emissions reductions across the Ontario economy,” the paper stated.

Provincial officials are seeking comments on the type of carbon pricing program, with the paper highlighting four approaches: cap and trade, baseline and credit, a carbon tax, and regulations and performance standards.

The paper also observed that some of Ontario’s closest neighbors and key competitors have launched carbon pricing programs, including the province of Québec, which has linked its cap-and-trade programs with California through the Western Climate Initiative (WCI). Ten companies in Ontario are already covered by Québec’s cap-and-trade program, which recently expanded to include transportation and heating fuels.

Aside from seeking advice on setting a carbon price, regulators are also asking for comments on the role that the agriculture and forestry sectors can play in reducing emissions and/or providing carbon sinks or offsets.

That’s High Praise

Ontario’s announcement was highly praised by the International Emissions Trading Association (IETA).

“In the absence of strong national leadership, climate policy in North America is increasingly being driven by action at the subnational level, including Ontario’s neighbor Québec,” says IETA President and CEO Dirk Forrister. “We welcome Ontario’s move to put a price on carbon and look forward to engaging the government on the advantages that cap and trade brings to reaching climate targets, while driving clean investment and innovation.”

Ontario isn’t the only North America jurisdiction currently considering adopting a carbon pricing program. In late 2014, Washington State Governor Jay Inslee released a proposal for a cap-and-trade program that would cover an estimated 130 facilities and fuel distributors operating in the state that emit more than 25,000 metric tons of GHG emissions per year.

“With Washington State also looking at connecting to the trading pool, the addition of Ontario would further drive down costs and increase compliance flexibility for businesses across these jurisdictions,” said Katie Sullivan, IETA’s Director of North America.

Ontario and Washington State were both previously members of the WCI, which now only features California and Québec and British Columbia pricing carbon, although British Columbia implemented a carbon tax. Ontario has also been an observer to the Regional Greenhouse Gas Initiative, the carbon trading program for nine states in the US northeast covering the power sector.