Ontario introduces cap-and-trade bill

Ontario's Ministry of the Environment tabled the Environmental Protection Amendment Act (Greenhouse Gas Emissions Trading), 2009 (the "Bill") today. The Bill amends the Environmental Protection Act (Ontario) ("EPA") to lay the groundwork for implementing a cap-and-trade system in the province.

The Bill proposes to revive s. 176.1(1) of the EPA to read as follows:

"The Lieutenant Governor in Council may make regulations establishing programs and other measures for the use of economic and financial instruments and market-based approaches, including without being limited to emissions trading, for the purposes of maintaining or improving existing environmental standards, protecting the environment and achieving environmental quality goals in a cost effective manner."

The Bill then specifies a non-exhaustive list of types of regulations that may be made to create the cap-and-trade system. The Bill appears to leave open the question of whether allowances will be auctioned or given away free of charge. It also contemplates trades with jurisdictions outside of Ontario. This is consistent with Ontario's membership in the Western Climate Initiative.

The Bill also provides for regulations that designate "a person or body to administer programs and other measures" established under the proposed act. For example, Ontario could choose to establish an arm's length corporation to administer allowance auctions and to distribute the revenues received thereunder.

Huge amounts of regulatory detail must still be drafted. The full details of Ontario's plan are therefore still unknown. Some indication of Ontario's plans may be found in a discussion paper included with the Bill (but originally released in December).

Both the proposed legislation and the discussion paper have been posted on the Environmental Registry for a 60-day comment period until July 26, 2009.

Stay tuned for more details.