What You Need to Know About Ontario’s New Cap and Trade Program

December 29, 2016 2:38 pm

Dear Customers, The Ontario government’s new Carbon Cap-and-Trade program is set to begin on January 1, 2017. As part of its mandate to lead Ontario’s efforts to reduce greenhouse gases and adapt to the effects of climate change, the Ministry of Environment and Climate Change has set out a program that requires identified businesses that emit green­house gases to obtain “allowances” equal to their annual emissions—effectively a license to emit. These allowances are to be sold at government auctions, or bought and sold between emitters (the “trade” in cap and trade). The “Cap” refers to the limited total number of allowances the government releases into the market annually, which will be reduced year over year as an incentive for reducing emissions. Ontario has elected to link its cap-and-trade system to existing ones in Quebec and California, meaning that businesses in all three jurisdictions will be able to trade allowances with each other. What is the impact to us as consumers? Regrettably, much of the initial impact of this program will be felt by end users. From electricity to natural gas, gasoline to propane, along with other fuels, users will experience increased prices tied directly to the initial roll out of the cap and trade program. The cost of carbon allowances incurred by propane and fuels importers and producers will negatively affect prices beginning January 1, 2017. Sales of affected products will include additional charges as noted below: It is estimated that these costs will initially equate to approximate increases of 2.78 cents per litre for propane, 4.27 cents per litre for motor fuels (gasoline), and 5.44 cents per litre for diesel fuels and 4.95 cents per litre for heating oil. Surprisingly, the Ontario Energy Board ruled that it is not a requirement to separately disclose the cost of cap and trade on bills despite stake­holder groups’ interest in disclosure. It has always been Dowler-Karn’s intent to provide transparency as to the impact of this program to our customers. We will include this as a memo on invoices and updated information will also be posted on our website. Adjustments will be made as we are advised by our supply partners. Please note, the Carbon Cap and Trade line item is subject to change (up or down) depending on market variability and the actual cost of the carbon allowances. The frequency of change has the potential to be quarterly in accordance with the auction schedules. According to the Ontario Auditor General’s recent report, Ontario households and businesses are forecasted to pay about $8 billion more to the Ontario government over four years begin­ning in 2017 for fossil fuels such as gasoline and natural gas. The funds generated by the Carbon Cap-and-Trade program are intended to be used to support the Ontario government’s Climate Change Action Plan (CCAP) to promote low-carbon energy solutions. We encourage our customers to seek out more information about this complex topic by visiting the Ontario Environment and Climate Change Ministry’s website at: www.ontario.ca/page/cap-and-trade or by speaking to your local members of parliament. The rules for how cap and trade will operate in Ontario as well as how cap-and-trade revenues are to be spent have been set out in the Climate Change Mitigation and Low-carbon Economy Act, 2016 and its regulations. Should you have any additional questions or concerns, please reach out to our Customer Account Representatives or review some of the links provided below. Thank you for your continued patronage and for electing to partner with Dowler-Karn Limited for your propane, fuels or lubricant requirements. We appreciate your business and look forward to serving you now and into the future. For more information, please visit the following: Climate Change Action Plan Climate Change mitigation and Low Carbon Economy Act, 2016 Regulation 452/09 Greenhouse Gas Emissions Reporting Regulation 144/16 The Cap and Trade Program Ontario Auditor General 2016 Annual Report – Climate Change