Greenhouse Gas Reporting in Ontario

As North America attempts to address the issue of climate change, Ontario has begun efforts to implement a cap and trade system to reduce its greenhouse gas (GHG) emissions. A cap and trade system (also known as emissions trading), is a market-based mechanism that has the potential to reduce GHGs as well as foster economic growth and job creation. The theory is that market forces will determine the most efficient way to reduce GHG emissions – those that can reduce emissions most cheaply will do so, with the ability to sell those emission credits to others who may not be able to reduce emissions as cheaply. In a cap and trade system, the government sets a limit or cap on the total amount of GHGs that can be emitted from regulated facilities. Individual facilities are issued emission permits (or credits) that allow the permit-holder to emit specified amounts of GHGs. Permit-holders that increase their emissions must find a way to offset them. One way to do so is to buy credits from others. The transfer of credits is known as the ‘trade’. Over time, the limits are gradually reduced in line with the government's emission reduction and climate change goals.

As the reporting of GHG emissions is one of the initial steps necessary to implement such a system, Ontario filed a Greenhouse Gas Emissions Reporting Regulation in December 2009. Moreover, the Regulation is intended to align Ontario's proposed system with programs being developed in other parts of North America, including those by the Western Climate Initiative and the United States Environmental Protection Agency.

Commencing on January 1, 2010, the Greenhouse Gas Reporting Regulation applies to facilities in Ontario emitting greater than 25,000 tonnes of carbon dioxide equivalent per year from a list of identified sources. Facilities emitting between 10,000 and 25,000 tonnes will not be subject to the reporting requirements. But, the Ministry of the Environment plans to encourage smaller emitters to report emissions voluntarily to ensure that they are prepared to adapt to emerging North America-wide requirements.

Ontario's reporting threshold aligns with the U.S. Environmental Protection Agency's mandatory GHG reporting threshold of 25,000 tonnes of CO2 and the introduction of the American Clean Energy and Security Act to establish a cap and trade system. However, unlike the U.S. approach, Ontario does not currently regulate fuel suppliers to report emissions attributable to the combustion of their products in transportation, residential, commercial or other industrial sectors. The emitters (between 200 and 300 facilities) include general stationary combustion, electricity generation, and petrochemical production among others are required to report on 30 Greenhouse Gases listed in the Regulation for inclusion in their CO2 calculations. The various reporting requirements contained in the Regulation will be phased in over the next three years in order to allow facilities to develop the necessary capacity to comply with the standardized emissions quantification methods as well as third party verification requirements.

In response to a number of comments on the costs and administrative burden associated with third party verification of emissions data, the Ministry of the Environment says it will continue to look for ways to "streamline" the verification requirements, in accordance with its other cap-and-trade partners. It will also work with accreditation agencies and verification service providers to ensure sufficient capacity is in place when the verification provisions take effect in the 2011 reporting period. A number of concerns were also raised about the protection of confidential business information. The Ministry has removed from the final regulation data submission requirements that are "not essential for the design of a future cap-and-trade program or for a high level quality assessment of the reported emissions." In addition, much of the sensitive information does not have to be submitted, but can be kept on site by the company for audit by the Ministry.

In conclusion, the implementation of this Regulation may serve as a wake up call to companies who believed that the government would not intervene on the issue of climate change. Moreover, it may be to companies’ benefit as the development of sustainability strategies can result in energy saving which translate directly to their bottom line.