Ontario’s Climate Change Action Plan:
Implications for companies and government
Ontario’s economy is entering a new low-carbon era through a cap and trade program and climate change strategy and action plan. Although the carbon price signal might be moderate in the early phases of the program to mitigate the potential impact, it’s designed to increase over time and accelerate the transition toward the low-carbon economy.
Businesses will need to take a strategic view on the carbon issue sooner rather than later. It is our view that the cap and trade system will create winners and losers. At the same time, governments will need to constantly justify the system’s economic and environmental legitimacy on the province’s economic and the environmental balance sheets.
Ontario’s cap and trade market
Mandatory participants in Ontario’s carbon cap and trade market, that is, companies operating facilities that emit greater than 25,000 tonnes of C02 equivalent (CO2e), otherwise known as large final emitters (LFEs), must reduce their internal greenhouse gas (GHG) emissions to an agreed-upon level, or cap, or offset emissions over the level set in each compliance period by acquiring credits or allowances. The first compliance period goes into effect on 1 January 2017.
Companies operating facilities that emit less than 25,000 tonnes of CO2e may opt into the program, in which case they will also be capped and their emissions must be verified.
In the first compliance period, LFEs can expect to receive most of the allowances, each equal to one tonne of C02e, they require to meet compliance obligations for free. However, allocated allowances will decrease each year. Companies will then need to either invest in emission-reduction initiatives, or purchase any additional allowances required at auction or from the secondary market.
Offset credits can also be used in place of allowances, but only up to an 8% limit. Offset project protocols, however, are still under development. Also still under development is the regulation for early reduction credits, which the Ontario Government will recognize to reward early actions to reduce emissions.
Download this report to learn more about:
- Accounting and tax implications for companies
- Getting your business ready for cap and trade
- Financing the transition to low carbon
- Climate risk disclosure
Download the complete
Ontario’s Climate Change Action Plan
as a printable document