Post on 07-Mar-2018
FACING CLIMATE CHANGE
Cap and Trade in Ontario ̶ CIAC
April 20, 2017, Toronto
Dianne Saxe
Overview
1: Who is the ECO?
2. Cap and trade
3. Spending the money
4. Is there hope?
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1: Who is the ECO?
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Who is the ECO?
Impartial, independent•
Guardian of the • Environmental Bill of Rights
Watchdog on:•Greenhouse gas emissions in •Ontario
Energy conservation•
Environmental protection•
Driven by what I have learned •in the last year
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(7) Really Good Reports
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CLIMATE ENVIRONMENTENERGY CONSERVATION
Find Them Here
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Making our work accessible
• Searchable/ Downloadable
• Webinars
• Climate science
• LTEP
• Executive summaries
• Primers
• Both official languages
• And others on request
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Public Access
Registry Alert system
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About you (DOTS)
EBR / ECO•Have you used our website or reports?•
Climate change•Which do you think is affecting your company more right now: Climate •change or carbon pricing?
Which do you think will affect your company more in the next • 10 years: Climate change or carbon pricing?
Has climate change caused your company any financial loss yet? y/n•
How soon will your company • be ready to disclose its climate –related financial risks, per the FSB guidelines? 2018, 2019, 2020, 2025, 2030
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2: Cap and TradeReady, Set, Go!
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Who are you working for?
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Ontario is doing so much right
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Coal power plant closures
Price on carbon
Action Plan
Climate Ready update?
New Climate Act
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Historical
Historical data: http://unfccc.int/national_reports/annex_i_ghg_inventories/national_inventories_submissions/items/9492.php
• Carbon pricing to increase fossil fuel costs
• Proceeds in Greenhouse Gas Reduction Account spent as per Action Plan
• Reduce GHGs by 80%?
0
50
100
150
200
250
1990 2010 2030 2050
On
tari
o G
HG
Em
issio
ns (
Mt
CO
2e
)
Business As Usual
Targets
Basic Theory – Polluter Pays
To reduce GHG emissions, we must put a price on • them
GHG polluters would emit less if they had to pay for the privilege•
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https://goo.gl/O4uUSH
Carbon Tax vs Cap and Trade
Carbon Tax:
Gov’t sets price
Cap and Trade:
Gov’t sets cap
Doesn’t include the
term tax
Lower cost GHG
mitigation
Faster to implement
Simpler to understand
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The first Ontario auction
March 2017 2017 Vintage 2020 Vintage
Allowances Available
for Sale
25,296,367 3,116,700
Allowances Sold 25,296,367 812,000
Settlement Price
(CAD)
$18.08 $18.07
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Cap and Trade Design Issues
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How high is the cap?How fast does the cap
drop?Who needs allowances?
Who must pay for them?
Competitiveness and carbon leakage
Stability and predictability
Cost and fairness Linking
Key Evaluation Metrics?
GHG emission reductions
Economic efficiency/cost-effectiveness
Market functioning
Carbon leakage18
Who Needs Allowances?
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Agriculture &
Waste
Does Not
Need
Allowances
Liquid Fuel and Natural Gas
Distributors
Needs Allowances, Costs Passed on to Customers
80% Industry
40 Mt 31 Mt100 Mt
Needs Own
Allowances
Who Pays, Who Doesn’t?
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Agriculture &
Waste
Does Not
Need
AllowancesPays for Allowances Indirectly
Liquid Fuel and Natural Gas
Distributors
>90% Free
Allowances until
2020
80% Industry
40 Mt 31 Mt100 Mt
Ontario’s Design Choices
Ontario’s cap and trade system is:
• Reasonable
• Appropriate for our economy
Challenges:
• It is complicated
• It will take time to work
• Needs longer-term certainty
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Linking with California and Quebec
Benefits
• Cheaper for emitters (us)
• Reduce carbon leakage
• Market functioning
Consequences
• Temporary outflow of Ontario cash:• $250+ million to California?
• $250+ million less fossil fuel imports?
• Lock in reliance on imported allowances?
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In first years, Ontario emitters may find it cheaper to buy allowances / credits
from California than to reduce emissions in Ontario
Bigger, more liquid
market
Lower, more stable prices
Lower prices
Less GGRA, Action Plan
funding
Offsets – Major Potential
Ontario Emitters within Cap
Emitters Outside Ontario
Ontario Emitters Outside Cap
• Possible Offsets, e.g.:• Mine methane• Landfill gas• ODS / refrigerants• N2O / fertilizer• Forest / afforestation• Urban forests• Livestock• Conservation cropping…
• Competitive?• If so, can keep money and GHG
reductions in Ontario
• Maximum? • 8% of emissions (not cap)• 11.4 Mt in 2020
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Offset Credits
Adapted from: https://openknowledge.worldbank.org/bitstream/handle/10986/23874/ETP.pdf?sequence=11&isAllowed=y
3: Spending the MoneyGreenhouse Gas Reduction Account
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Climate Change Action
Plan?
Ontario Consolidated
Revenue Fund
Greenhouse Gas Reduction Account
Emission allowance auction
$Greenhouse Gas
Reduction Account$
Initiatives “that are reasonably likely to
reduce, or support the reduction of,
greenhouse gases” or for related government
expenditures
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$
Dividend
• $1.8 billion per year?Mostly from everyone who buys petroleum products and natural gas•
Limited impact to Large • Final Emitters and electricity sector (90% fossil free)
$
Will the money be used well?
• $350 million already spent/ committed
• Diversion a big risk:
• Initial plan to subsidize electricity rates
• Transparency and accountability
• We’re pushing hard
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5 Year Climate Change Action Plan
• More of a direction than a plan
• No precision in the numbers
• Compromise document
• After 44 drafts, several leaks
• Details being worked out after
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Good Ideas That Will Take Time
• Land use and transit
• Green bank
• Cleantech companies
• Reductions:
• When?
• Where?
• How big?
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Big Claims for 2020
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-Not Plausible
• Subsidizing the Global Adjustment – 3 Mt
• Per ECO - no plausible additional reductions
• Renewable fuel regulation – 2 Mt
• Per ECO - plausible, requires careful regulation of environmental effects
• Could have high per tonne cost
• Industrial transformation - 2.5 Mt
• Per ECO
• no clear mechanism
• cannot quantify
After Action Plan: Still lots to do
Mitigation•How to build a low• -carbon economy?
Adaptation•
• What will make Ontario resilient?
Many risks, opportunities and co• -benefits
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Compliance Gap
How will Ontario meet the 2020 target?
• Reductions?
• Offsets?
• California allowances?
• Early reduction credits?
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0
5
10
15
20
25
30
Compliance Gap
Mt
CO
2e
q
Other
Action Plan
Cap and Trade
4. Knowledge + Action = HopeNo one can do everything, but everyone can do something
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Lots of Progress
• Encouraging international, national, and provincial progress
• Paris Agreement – came into in force on November 4, 2016
• Kigali Amendment to Montreal Protocol – hydrofluorocarbons
• Carbon Offsetting and Reduction Scheme for International Aviation
• Pan-Canadian Framework
• Green Bonds >$100 B
• Despite U.S. election…
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Who is Leading by Example?
• MOHLTC: Health Impacts
• MTO: More transit, Cycling Strategy
• OMAFRA: Soil Carbon/Soil Health
• Toronto, Oxford County
• Region of Durham: Adaptation Plan
• Hamilton bio buses
• Waterfront Toronto: Green Procurement
• Task Force on Climate Related Risk Disclosure
• Universities?34
Bristol Bio Bus
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What Can I Do?
• Climate cannot be left entirely up to government
• It’s not too late36
Reduce your carbon footprint
Get ready to adapt
Speak up
Questions?
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Download the Facing Climate Change report
and the Introduction to Cap and Trade in Ontario document: eco.on.ca
Contact us: commissioner@eco.on.ca