Bill 4, Cap and Trade Cancellation Act, 2018

On September 11, 2018, public notice was provided of Bill 4, Cap and Trade Cancellation Act, 2018 on the Environmental Registry of Ontario and the Environmental Bill of Rights Environmental Registry.1 This public notice has been posted forty eight days after Bill 4 was introduced into the Ontario Legislature on July 25, 2018. Sections 15-17 of the Environmental Bill of Rights, 1993 require that at least thirty days notice be given before proposals that could have a significant effect on the environment are implemented. Bill 4 is being debated in the Ontario Legislature,2  which is currently adjourned for summer recess and will return for its fall sitting on September. Comments on the draft legislation are due by October 11, 2018.

If passed, Bill 4 will repeal the Climate Change Mitigation and Low-carbon Economy Act, 2016 (CCMLEA); set out the legal framework for an orderly wind-down of the greenhouse gas cap and trade program; and trigger a federally imposed carbon pricing regime.

While the bulk of Bill 4, Cap and Trade Cancellation Act, 2018, is dedicated to the repeal of the CCMLEA, and the insulation of the Ontario government from civil claims related to the wind-down of the cap and trade program, it also includes vague requirements with respect to the establishment of greenhouse gas (GHG) emission targets and the development of a climate change plan.


Cancellation of Cap and Trade Allowances and Credits

At section 7 and 8, Bill 4 provides for the retirement of "eligible instrument" (meaning a cap and trade instrument that, (a)  was held in the cap and trade accounts of a participant on July 3, 2018, and (b) is not classified with or assigned a vintage year of 2021) and the cancellation of cap and trade instruments held in the cap and trade accounts of participants on July 3, 2018 as well as those created under the CCMLEA  but not distributed. For the purposes of the cancellation of cap and trade instruments, the Bill provides that 'cap and trade instrument' means:

  1. An Ontario emission allowance within the meaning of subsection 1 (1) of the Climate Change Mitigation and Low-carbon Economy Act, 2016 as that provision read immediately before the repeal of that Act;  
  2. An Ontario credit within the meaning of subsection 1 (1) of the Climate Change Mitigation and Low-carbon Economy Act, 2016 as that provision read immediately before the repeal of that Act; and  
  3. An instrument that was, on July 2, 2018, set out in Column 1 of the Table to section 10.1 of Ontario Regulation 144/16 (The Cap and Trade Program) made under the Climate Change Mitigation and Low-carbon Economy Act, 2016.

Compensation for Cap and Trade Participants

Subsection 8 (1) of Bill 4 requires that the provincial government pay compensation to prescribed participants according to a prescribed formula. The amount of compensation will be determined in accordance with the regulations and paid from the Cap and Trade Wind Down Account, previously the Greenhouse Gas Reduction Account which was used to fund initiatives3 likely to reduce, or support the reduction, of GHG emissions. The obligation to pay compensation under subsection 8(1) is subject to various limitations set out in the Act. Certain participants are excluded from the right to compensation, including participants that were registered as:

  1. a market participant within the meaning of the CCMLEA;
  2. a participant with respect to the importation of electricity into Ontario for consumption in Ontario;
  3. a participant with respect to the distribution of natural gas in Ontario;
  4. a participant with respect to the operation of equipment related to the transmission, storage and transportation of natural gas;
  5. a participant with respect to the supply of petroleum products for consumption in Ontario;
  6. a participant with respect to the operation of equipment for a transmission system within the meaning of subsection 2 (1) of the Electricity Act, 1998 and that has been issued an order under subsection 78 (1) of the Ontario Energy Board Act, 1998.

The Cap and Trade Wind Down Account will also be used to fund the administration, enforcement, repeal and winding down of the CCMLEA and the wind down of initiatives under that Act, as well as the administration of the Cap and Trade Cancellation Act.4


Proposed Climate Change Action Plan and Reduction Targets

In addition to the repeal of the CCMLEA, subsection 3(1) of Bill 4 provides that the government must establish targets for the reduction of greenhouse gas emissions in Ontario and, under subsection 4(1) that the government must prepare a climate change plan. No further details are included within Bill 4 to indicate the timeframe in which reduction targets or a climate change plan must be established. Without specific provisions, any newly established emission targets may not have the force of law, and, not being enshrined in legislation or subject to the legislative process, may be revised with relative ease. There is also no requirement to ensure that the reduction targets, when established, be set to achieve any specific emissions levels. In contrast, the CCMLEA set a specific deadline for the laying of the action plan before the legislative assembly and required a climate change action plan to, generally, set out actions to modify behaviour that would enable Ontario to achieve its targets for the reduction of greenhouse gas emissions and committed the Province to achieve emissions levels of 15 per cent below 1990 levels by the end of 2020, 37 per cent by the end of 2030 and 80 per cent by the end of 2050. The Ministry was also bound to revise and review the action plan at least every 5 years.

The climate change plan under Bill 4 excludes other notable considerations and requirements that were present in the CCMLEA. The climate change action plan under the CCMLEA included a requirement to both, consider the impact of the regulatory regime on low-income households, and develop actions to assist those households in the transition to a low-carbon economy. The CCMLEA also mandated the consideration of First Nation and Métis traditional ecological knowledge, if offered, with respect to the climate change action plan. Neither the impact on low-income communities, nor the traditional ecological knowledge of First Nation and Métis communities are taken into consideration under Bill 4's climate change plan. These omissions are unfortunate. The inclusion of these provisions in the CCMLEA enshrined the importance of working with Indigenous partners in the spirit of reconciliation and a duty to vulnerable low-income communities adversely affected by the inevitable transition away from a carbon intensive economy.

Bill 4 also provides, at subsection 4(2), that the government may, for the purpose of preparing the climate change plan, appoint advisory panels. Subsection 5(1) requires that the Minister prepare reports in respect of the climate change plan "on a regular basis". The now repealed CCMLEA required the Minister to prepare a report at least once every year that would describe the status of the actions set out in any climate change action plan.


Insulating the Ontario Government from Lawsuits Resulting from the Repeal of the Cap and Trade Program 

Section 9 and 10 attempt to insulate the government and specified related persons from civil claims, including by stating at subsection 9(1) that "no person is entitled to any compensation or damages in respect of the value of cap and trade instruments retired or cancelled under this Act or for any other loss, including loss of revenues or loss of profits, related, directly or indirectly, to the enactment of this Act, the making or revocation of any regulation under this Act, the repeal of the Climate Change Mitigation and Low-carbon Economy Act, 2016 or the making or revocation of any regulation under that Act".

Bill 4 also proposes to prevent any cause of action against the Crown from arising out of various specified matters by legislating the extinguishment of any existing proceedings, and the prevention of any future proceedings, against the Crown and other specified related persons, in relation to specified matters. Subsection 10(1) states that no cause of action arises against the Crown or any current or former member of the Executive Council or any current or former employee or agent of or advisor to the Crown as a direct or indirect result of (a) the enactment, operation, administration or repeal of any provision of Bill 4 or the CCMLEA, or (b) the making or revocation of any provision of a regulation made under Bill 4 or the CCMLEA, or (c) "anything done in accordance with" or under Bill 4 or a regulation made under Bill 4 or "anything not done in accordance with" Bill 4 or a regulation made under Bill 4, including any decision related to participants' eligibility to receive compensation or the amount of such compensation; (d) the retirement or cancellation of any cap and trade instrument in accordance with Bill 4; or (e)  any act or omission related to the wind down of the cap and trade program established under the CCMLEA, including the decision to have no further distribution of cap and trade instruments by auction.

Subsection 10(2) bars any proceeding for a remedy in contract, restitution, tort, misfeasance, bad faith, trust, or fiduciary obligation against the Crown or any current or former member of the Executive Council or any current or former employee or agent of or advisor to the Crown. Subsection 10(3) applies to any action or other proceeding claiming any remedy or relief, including specific performance, injunction, declaratory relief, any form of compensation or damages, or any other remedy or relief, and includes a proceeding to enforce a judgment or order made by a court or tribunal outside of Canada. Subsections 10(2) and (3) apply retrospectively such that any proceeding commenced before the Act comes into force is deemed set aside and dismissed without costs, and any causes of action which arose before the Act comes into force are barred.


Subsection 15(1) of Bill 4 provides the Lieutenant Governor in Council the broad power to make regulations governing "anything that is required or permitted to be prescribed or that is required or permitted to be done by, or in accordance with, the regulations or as authorized, specified or provided in the regulations".


Note that the proposal is subject to a 30-day public review and comment period starting September 11, 2018 and ending October 11, 2018. Note also that on-line submission of comments on this proposal is not permitted through the Environmental Registry. Written submission will be accepted through the EBR Environmental Registry if addressed to:

Cap and Trade
HELP DESK
Ministry of the Environment and Climate Change
Climate Change Directorate
Cap and Trade Branch
135 St Clair Avenue West
Toronto ON M4V 1P5 
Phone: (888) 217-3326

Comments may be submitted via the new Environmental Registry of Ontario (online: https://ero.ontario.ca/notice/013-3738) or written comments can be submitted to:

 
Cap and Trade - Help Desk

Cap and Trade Branch

77 Wellesley Street West 
10th Floor, Ferguson Block
Toronto ON M7A 2T5

Footnotes

1 Environmental Registry of Ontario, Bill 4, Cap and Trade Cancellation Act, 2018) ERO no. 013-3738, online; https://ero.ontario.ca/notice/013-3738; Environmental Bill of Rights Environmental Registry, "Bill 4, Cap and Trade Cancellation Act, 2018" (Date Proposal Loaded ot the Registry: Sept 11, 2018) EBR Registry No. 013-3738, online: 1 Environmental Registry of Ontario, Bill 4, Cap and Trade Cancellation Act, 2018) ERO no. 013-3738, online; https://ero.ontario.ca/notice/013-3738; Environmental Bill of Rights Environmental Registry, "Bill 4, Cap and Trade Cancellation Act, 2018" (Date Proposal Loaded ot the Registry: Sept 11, 2018) EBR Registry No. 013-3738, online: http://www.ebr.gov.on.ca/ERS-WEB-External/displaynoticecontent.do?noticeId=MTM2MDM5&statusId=MjA3Mjcy&language=en

2 Government of Ontario, Ontario Legislature, "Bill 4, Cap and Trade Cancellation Act, 2018" online: https://www.ola.org/en/legislative-business/bills/parliament-42/session-1/bill-4/status

3 Climate Change Mitigation and Low-carbon Economy Act, 2016, S.O. 2016, c. 7, s. 71(1), (2) and Schedule 1.

4 Legislative Assembly of Ontario, Bill 4, Cap and Trade Cancellation Act, 42nd Parl, 1st sess., Ontario, 2018, (Second Reading Debate), s. 11(2).

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