The Ontario cap and trade program was introduced by the Ontario government in January 2017 and it will effect a lot of different businesses and individuals as well. We’re going to cover as much of this fresh topic as possible for those who may not be in the know.
What is cap and trade?
Cap and trade is a government regulation that is based on company’s emissions. The simple idea is that the amount of emissions that a company can produce are “capped” at X amount. If you produce more than that, you need to purchase, on an open market, the extra emissions from a company that has produced less than their allotted amount.
Why have a cap and trade?
Now that you understand the basic concept of a cap and trade, the question that begs to be answered is why have one? The answer to this is two fold, to reduce the amount of emissions but also to reward companies who lower their emissions. If a company lowers their emissions and is then able to sell it to less responsible companies, they’re creating a new revenue stream for their business. As you can imagine, the best way to incentivize companies to reduce their emissions is by hitting them in their pocket book, but by also allowing companies to sell their extra emissions you’re also rewarding the companies who do well.
What businesses does cap and trade affect?
There’s two different categories of companies that can participate in the Ontario cap and trade program, voluntary companies and companies that are required by law to participate. The companies that are required to participate by law include any importers of electricity, a facility or natural gas distributor that emits 25,000 tonnes or more of greenhouse gas emissions per year or a fuel supplier that sells more than 200 litres of fuel per year. If your company generates between 10,000 and 25,000 tonnes of emission you’re not required but encouraged to sign up for the program.
Individuals, non-profit organizations or even enterprises that do not fit the legal requirements can still participate in the cap and trade market.
How does cap and trade affect the ordinary joe?
The full effects are still yet to be seen as this is a new program and changes in the market (therefore prices) are subject to the volatility of the market which could have residual effects. With that being said, the ordinary Joe can expect to pay more for gasoline. When gasoline costs more, it also has the residual effect of increasing costs for other businesses like grocery stores which then raise the prices for the goods they sell. The overall effect might be slight, you shouldn’t expect to pay $100 for an orange because of the cap and trade program, however small and gradual increases over time can hit the pocket.
On the brighter side, you can look forward to a better climate and less pollution. Due to the finite nature of the cap and trade system, it will continually be decreased and that, overall, will increase the overall environment.
If you’re a business that’s been affected by cap and trade, what should you do?
The first thing you should do is familiarize yourself with the program by visiting the following Ontario government webpage. If you want to make sure you’re tackling this issue with the utmost care, as you probably should, you can also contact an Ontario cap and trade consultant.