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Cap and trade is coming Jan. 1, 2017

As part of its climate change initiatives, the provincial government has introduced a cap-and-trade program beginning January 1, 2017.  The program’s aim is to reduce greenhouse gas emissions by giving an incentive to polluters to cut emissions and by placing a “cap” or limit on the amount of GHG emissions that polluters can release into the atmosphere. 

Climate change occurs when long-term weather patterns are altered – such as through human activities like burning fossil fuels, which releases GHGs into the atmosphere.  Climate change produces negative economic and environmental impacts including: higher food costs; increased energy insecurity, and extreme weather events that damage infrastructure and property.  Reducing greenhouse gas emissions helps slow the effects of climate change.

Participation in Ontario’s Cap and Trade program is based on the volume of emissions by an individual end user and the program focuses on major GHG emitters (e.g. steel or cement factories, mining, natural gas distributors, petroleum product suppliers, and electricity importers).  It is mandatory for emitters of 25,000 tonnes of GHG emissions per year or more and voluntary for emitters of over 10,000 tonnes of GHG emissions per year. ORHMA members would typically not be considered emitters under Ontario’s cap and trade program, and natural gas distributors will be required to manage their participation in this process.

Under this new legislation, Union Gas and Enbridge must buy emission allowances for the natural gas used by its residential and business customers, as applicable. These costs will then be recovered through your natural gas bill. The cap-and-trade cost will be added to the Delivery charge on your bill. If the price of emission allowances changes, the charge on your bill will be adjusted accordingly, just as it is for other annual rate adjustments. The Ontario Energy Board will review and approve all cap-and-trade costs before they are included on your bill.

The price of GHG emission allowances will vary with supply and demand, and can change over time. The cap-and-trade cost is expected to be about 3.3 cents per cubic metre (m3) of natural gas used in 2017. The total cost will therefore depend on how much gas you use and funds generated by the cap-and-trade program will be used to support the Ontario government's Climate Change Action Plan (CCAP) to promote low-carbon energy solutions.