Ontario Will Begin Cap and Trade Program, Join California, Quebec, Others

April 14, 2015

Carbon pricing is inevitable. What we are seeing, in the absence of a global agreement, is increasing areas of regional action – which are steadily demonstrating that a carbon price not only does not hurt economies, it drives innovation and is a prerequisite for states, provinces, or countries, that wish to remain, or become, technological leaders.


Ontario will join a cap-and-trade market set up by Quebec and California to reduce carbon emissions and slow the pace of climate change, provincial Premier Kathleen Wynne said on Monday.

Quebec joined California’s cap-and-trade carbon market in 2014. Both are part of the Western Climate Initiative, a group of U.S. states and Canadian provinces moving to create a carbon market to reduce emissions. Ontario, Canada’s most populous province, had long signaled it would also opt for cap-and-trade.

“The cost of further delay, further pollution, and further catastrophic and irreversible weather events – these are the costs that we cannot endure, the costs that we must not impose on our children and grandchildren,” said Wynne, a Liberal.

Cap-and-trade markets require industrial facilities to purchase or trade permits at a market price for each unit of carbon emitted. Ontario offered no pricing details on Monday.

Toronto Globe and Mail:

Canada’s provinces are taking command of the nation’s battle against climate change, seizing the initiative from a reluctant federal government as the clock ticks down to a crucial international climate agreement later this year.

Ontario Premier Kathleen Wynne on Monday signed a historic deal to join Quebec’s cap-and-trade system for carbon emissions, while British Columbia Premier Christy Clark was invited to promote her province’s carbon tax at the World Bank – an honour not usually accorded to a provincial leader.

“Climate change is one of the greatest challenges humankind has ever faced. This is about preserving a world for our children and our grandchildren,” Ms. Wynne told reporters after meeting Mr. Couillard in his office near the National Assembly. “We cannot wait for a particular moment when the federal government decides it is going to engage.”

Many of the details in Ontario’s cap-and-trade system still have to be worked out over the next six months, but it is likely to look similar to the joint system run by Quebec and California. In that model, the government sets a cap on emissions and hands out some permits to industry for free while auctioning others off. The proceeds are then plowed back into other green programs, such as public transit.

Once Ontario’s system is operating, 62 per cent of Canada’s population and more than half its economy will be under the same carbon market. Including B.C., which uses a carbon tax instead, some three quarters of Canadians will be covered by provincial-level carbon pricing.

In California, and the Northeastern US,  similar programs have met with success.

Environmental Defense Fund:

(California) has been able to grow its economy significantly while keeping greenhouse gas pollution from rising, too.

Emissions capped under the program decreased by almost 4 percent during the first year of the program. What’s more, California’s ambitious climate change and clean energy policies have created a thriving economy that is growing faster than the overall national economy and attracting considerable amounts of investment.

Since 2006, California has received more clean-tech venture capital investment than all other states combined and leads the rest of the nation in clean-tech patent registration.

In addition, California successfully linked its program with Quebec’s over the past year, proving that motivated governments can work effectively together and do more in partnership than they can alone.

This outcome may inspire similar linkages around the world.


In the US Northeast, the Regional Greenhouse Gas Initiative (RGGI) is exceeding expectations. Since 2008, the cap and trade program has reduced emissions from the power sector by 30 percent. Over the first three years of the program, RGGI states turned $912 million in proceeds into $1.6 billion in economic value for state economies and created 16,000 new jobs.

In California – the world’s 8th largest economy – cap and trade is off to a roaring start. Since its inception in 2013, the program, which covers 85 percent of the state’s GHG emissions, has already seen capped emissions fall by 4 percent. Jobs growth, economic output and efficiency, and clean technology venture capital investment are all up significantly – and well above national averages – since the Global Warming Solutions Act became law. As of 2014, California’s market is fully linked with Quebec – a bond that aims to pave the way for similar linkages worldwide.

Sacramento Bee:

The Canadian province of Ontario announced that it will join the “cap-and-trade” market launched by California in late 2012. The program requires affected industries to purchase emissions credits at market prices; it reduces emissions by gradually reducing the volume of available credits each year.

Ontario becomes the second Canadian province to partner with California on the effort. Quebec joined last year. California and Quebec now run joint auctions; an emissions credit purchased in California can be used by a company in Quebec, and vice versa.

California has long urged other states to join its program, arguing that the program becomes a more effective tool to fight climate change if more jurisdictions get involved.

“This is a bold move from the province of Ontario – and the challenge we face demands further action from other states and provinces around the world,” said Gov. Jerry Brown in a prepared statement.


5 Responses to “Ontario Will Begin Cap and Trade Program, Join California, Quebec, Others”

  1. neilrieck Says:

    As a person who has lived in Ontario Canada all my life, let me add a comment or two: The thing I don’t like about cap-and-trade is that it allows too many places for the marketeers to fiddle. A carbon-tax at the source would be more straight forward while avoiding the monkey business usually associated with Bay Street (Toronto’s version of Wall Street). That said, if Bay Street is allowed to make money via cap-and-trade then this may be the only way to reduce carbon emissions. It may be “a deal with the devil” but “a deal is better than no deal at all”. Just my 2-cents.

  2. Gingerbaker Says:

    The proposal of schemes like Cap and Trade is a glaring beacon of the failure of governments to do their jobs responsibly.

    Schemes like Cap and Trade mean that governments are not solving the national- and international-scale scale problem of AGW, and instead are sloughing off the whole affair to the vicissitudes of market forces.

    How many times does it need to be said? The only way we are going to solve AGW is by building and deploying new energy farms. Everything else is a distraction.

  3. The devil will of course be in the details which haven’t yet been announced. However, with a gradually declining cap carbon emissions will go down as long as the enforcement is there. The market is left only to determine the price and the methods used to achieve the carbon reduction.

    Fossil fuel use for transportation and home heating is almost completely price inelastic so raising the price of carbon with a tax is terribly inefficient at producing reductions. Sure is you raise the price enough you get reductions but compare gas prices in the US to prices elsewhere. By price you could say the UK has the equivalent of 100% tax on gas (compared to US prices) but the reduction in fuel consumption by cars in the UK isn’t significant enough to make the future of vehicle GHG emissions go to zero.

  4. Gingerbaker Says:

    ” So if you keep the price up for 8 to 10 years, you’re good.”

    Yes – if your definition of “good” means people are all still using ICE automobiles, the overall [CO2] emissions are minimally affected, and no new carbon-free energy farms are actually or necessarily mandated, constructed or deployed.

    How long have people been talking about Cap &Trade, or a Carbon Tax? 10 years? 15 years? 20 Years? The Koch brothers LOVE it when people argue about these schemes, instead of arguing about actually building the machines that will make their oil obsolete.

    People argued passionately about deck chair placement on the Titanic, too.

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