Thursday, June 9, 2016

Carbon cap and trade system is the core of Ontario’s new climate action plan


Ontario Government made announcement about the province’s Climate Change Action Plan, which commits up to $8.3-billion over five years to driving down greenhouse gas emissions. It contains 76 new programs, including financial incentives for homeowners and landlords to retrofit buildings and for drivers to buy electric vehicles. A mid-term goal is to cut province’s GHG emissions by 37% below 1990 levels by 2030.
The announcement complements the objective – put in its legislation – of cutting GHGs by 15% by 2020 and 80% by 2050, based on 1990 levels. Ontario has already met its 2014 target of cutting GHG emissions by 6%. 
The core of Ontario’s climate plan is its cap and trade mechanism, which will enter into effect in July and will create the largest regional carbon market in North America when linked to the joint Emission Trading Scheme of Québec and California. A cap and trade system has been chosen over other carbon pricing schemes because cap and trade is more cost effective and provides companies with the flexibility ― such as multi-year compliance periods ― to choose the compliance path that aligns with their business plans and investment decisions. 
Financial mechanism of Climate Change Action Plan includes the Green Investment Fund, which currently totals CA$325 million and uses the revenue of the cap and trade system, which is expected to raise up to CA$1.9 billion per year. This way, the government has created a ‘virtuous cycle’ where the carbon price and the climate plan work together to reinforce each other.