Ontario Proposes Cap and Trade Program Changes

Ontario Proposes Cap-and-Trade Program Changes

The Ontario Ministry of the Environment and Climate Change (MOECC) is proposing regulatory amendments to the province's cap-and-trade program, including revised methods for allocating free allowances to specified facilities, as well as other administrative amendments.

What You Need To Know

• Proposed changes to the Cap and Trade Program Regulation (O. Reg. 144/16) and the Methodology for Distribution of Ontario Emission Allowances Free of Charge (Free Allowance Methodology) include:

• moving from energy use or historical emissions-based allocation to the product output benchmark or emissions intensity-based methods for certain facilities;
• updating existing product output benchmarks and historical emissions intensities to better align with facility and sector emissions;
• clarifying that facilities which receive indirect useful thermal energy (e.g., imported steam) and pass some of it on to other facilities are eligible for free allowances only in respect the portion they consume on-site; and
• administrative amendments to improve program administration and implementation.

• Complementary amendments are being proposed to the Quantification, Reporting and Verification of Greenhouse Gas Emissions Regulation (O. Reg. 143/16) and the Guideline for the Quantification, Reporting and Verification of Greenhouse Gas Emissions (Reporting Guideline).
• The MOECC is accepting public comments on its proposal until May 20, 2017.

Proposed Amendments to the Cap-and-Trade Program

Changes to O. Reg. 144/16 and Free Allowance Methodology

Based on stakeholder consultation, the MOECC has proposed amendments to the Free Allowance Methodology to better account for changes in facility production and operations, and to move from energy use and historical emissions-based methods to product output benchmark and emissions intensity-based methods, as follows:

• Certain facilities in the used oil processing, pulp and paper, mineral wool insulation, consumer products, and fuel ethanol sectors are currently eligible to receive free allowances under the energy use method or historical absolute emissions method. Under the MOECC's proposal, the free allocation of allowances to these facilities would be based on the product output benchmark or historical absolute emissions method.
• Recognizing that certain facilities in the industrial ethanol and beer production sectors have emissions associated with onsite cogeneration, the MOECC is proposing to revise current allocation methods (which are based on historical emissions intensity or product output benchmarks) so that the amount of free allowances these facilities may receive will also account for cogeneration emissions.
• Under the MOECC's proposal, facilities that receive indirect useful thermal energy (e.g., imported steam) and transfer some of it to other facilities will be eligible for free allowances only in respect of the portion they consume on-site.

Changes to O. Reg. 143/16 and Reporting Guideline

The MOECC is also proposing certain amendments to O. Reg. 143/16 and the Reporting Guideline, including the following:

• Under O. Reg. 143/16, when process fuels used by iron and steel producers are transferred off-site, the responsibility for emissions reporting is currently imposed on the recipient facility, whereas the transferor remains eligible to apply for free allowances. The MOECC proposes to require iron and steel producers to report emissions from all such process fuels, including any amount that is transferred off-site.
• To address cases where natural gas distributed to a capped participant is then transferred to a non-capped participant, the MOECC is proposing to require a capped participant to report emissions for natural gas used at its own facility as well as for any volume transferred to a non-capped facility.

Comments on the proposed amendments can be submitted to the MOECC online through the Environmental Registry by May 20, 2017.