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Climate Change Update - 2015 in Review and What's in Store for 2016

Published on
December 21, 2015

Over the last 6-8 months, there has been an incredible amount of activity related to climate change policy development, not only in Ontario but across Canada. A number of important steps were taken on both the provincial level of government but with a newly elected Liberal government in Ottawa, we have seen the climate change file escalate dramatically, just in the last few months. The steps taken in 2015 will lead to an equally exciting year ahead.

While time has shown that the climate change file has ebbed and flowed when it comes to being a priority for governments, it is clear that with a number of the measures and commitments that have been made recently that a decisive path towards a low-carbon economy has been established. It will become increasingly important for all types of industry – and consumers – to be mindful of this new path, and its role in future government policy and initiatives. This is also bolstered by a Canada 2020 poll that indicated 84% of Canadians believe that prosperous countries such as Canada have an obligation to show international leadership in reducing greenhouse gas emissions.

Sussex would like to provide an overview of the recent activity federally in particular and in Ontario, as well as an outline of what we can expect to see in 2016. Of course, there has also been considerable activity of late in British Columbia, Alberta and Manitoba, which we have also been following closely.

If you have any questions or would like additional information on these other provinces, please do not hesitate to reach out to our team.

Government of Ontario:

Over the course of 2015, the Ontario government has taken significant steps in shaping its approach to fighting climate change:

February 2015: The Ontario Ministry of Environment and Climate Change (MOECC) released its Climate Change Discussion Paper, which outlined the current emissions landscape in Ontario, and proposed short and long term goals to reach the province’s 2020 greenhouse gas (GHG) reduction target of 15% below 1990 levels, and looking forward to achieve its 2050 target of 80% below 1990 levels. A series of public consultations took place, including on which type of carbon pricing regime should be implemented, i.e., carbon tax or cap and trade.

April 2015: Ontario announced that it would design a cap and trade program aimed to lower the level of GHG emissions from Ontario businesses, institutions and households. The "cap" puts a limit on how many tonnes of greenhouse gas pollution that businesses, institutions and households can emit. This cap is set at a specific amount, which drops each year to encourage lower emissions, currently projected at 3.7% per year. Companies must have enough allowances (or credits) to cover their emissions if they exceed the cap. To comply, companies can generally invest in clean technologies to become more efficient; burn less fossil fuels; and/or purchase additional credits. Revenue from the cap and trade program is intended to go towards projects and initiatives that will lead to absolute reductions in GHG emissions. The province intends to link its program with California and Quebec under the Western Climate Initiative.

July 2015: Ontario hosted the Climate Summit of the Americas leading to the Ontario becoming a signatory to the following:

- Compact of States and Regions, which commits partner jurisdictions to annual public reporting of greenhouse gas emissions;

- ‘Under2’ MOU along with 11 other subnational governments, with objective to limit the earth’s warming to 2°C, which the Intergovernmental Panel on Climate Change (IPCC) scientists indicated is needed to avoid dangerous climate change;

o The Climate Action Statement, signed by 22 subnational governments, highlights the urgency of combating climate change, affirms that state, provincial and municipal governments are leaders in achieving significant global climate action and need to work together to reduce GHG emissions.

June – December 2015: MOECC began sector-based stakeholder consultations requesting input for the design of Ontario’s cap and trade program. The Ontario program will cover emitters of 25,000 tonnes or more of carbon dioxide equivalent (CO2e) annually. Amendments to the GHG reporting requirements (O.Reg 452/09) were also proposed, and made final in December 2015. The most significant change was that facilities emitting 10,000 tonnes or more will now be required to report their emissions but the participation level for the cap and trade program would remain at 25,000 tonnes of CO2e per year. The cap and trade program is proposed to begin in January 2017, and join other programs under the WCI in January 2018. A Request for Bids (RFB) was posted by the provincial government for ‘Offset Protocol Adaptation for Compliance Markets’ looking for an organization to adapt and develop protocols to facilitate the creation of GHG offsets for use in the cap and trade program.

November 2015: Leading up to the United Nations Framework on Climate Change (UNFCCC) Conference of Parties (COP21) in Paris, Ontario makes a series of announcements:

o MOECC released a Cap and Trade Program Design Options paper, requesting feedback in response to a number of proposed design mechanisms, such as program scope, trading rules, use of offset credits, and distribution of allowances. Submissions were due December 16th.

o Based on feedback from the Discussion Paper, Ontario released its Climate Change Strategy, which takes a long-term approach to achieving its 2050 GHG reduction target of 80% below 1990 levels, by focusing on five priority areas: A prosperous low-carbon economy with world-leading innovation, science and technology;government collaboration and leadership; a resource-efficient, high-productivity society; reducing greenhouse gas emissions across sectors; and adapting and thriving in a changing climate

o As part of Ontario’s Fall Economic Statement, Ontario introduces a down payment of $325 million in 2015–16 through a Green Investment Fund that will be targeted at reducing GHG emissions while strengthening the economy. Through this initial investment, the fund will support energy retrofits in homes, including affordable housing; energy-efficiency investments in small and medium-sized businesses and industry; support for Aboriginal communities; and new investments in electric vehicle infrastructure.

December 2015: Ontario attended the COP21 in Paris, as part of the federal delegation. While in Paris, the Premier and Minister Glen Murray announced a $20 million investment into electric vehicle infrastructure through the Green Investment Fund. Premier Wynne also signed a new MOU with Manitoba and Quebec that lays out the intent to link the cap and trade programs in all three provinces under the Western Climate Initiative, further strengthening North America’s largest carbon market.

Looking forward to 2016, we anticipate ongoing consultations with stakeholders regarding the cap and trade program, with a draft regulatory proposal being posted for comment in early 2016. The final regulation will be posted in Q2/Q3 next year.

Following the release of the climate change strategy, a separate five-year action plan will be released in 2016 will include specific commitments for meeting our 2020 emissions reduction target and establish the necessary framework to meet Ontario’s 2030 and 2050 targets. We also expect specific measures to be announced as part of the Ontario 2016 Budget.

Finally, there will be significant attention paid to the federal-provincial discussions regarding climate change policy, given the resurgence of the issue on the federal level, and the cross-jurisdictional responsibilities both levels of government can assume on the topic.

Government of Canada:

Despite the fact that climate change was not a prominent, standalone campaign issue during the 2015 federal election, it has certainly become a significant topic for the newly elected Trudeau government. This is partly due to the timing of the COP21 in Paris, which took place a short time after the new Federal Cabinet was appointed. Further, it would be fair to say that there was substantial global momentum heading towards the Paris Conference, encouraged by last year’s agreement between the US and China, and the fact that more than 180 parties had tabled their Intended Nationally Determined Contributions (INDCs) to the UNFCCC prior to the conference, keeping the topic relevant.

During the campaign, Justin Trudeau had said that if elected he would work with the provinces on a national climate strategy and assessing a national carbon price, whilst respecting the carbon pricing regimes that were already in place or being established in a number of provinces. Trudeau also committed to meeting with the provinces within ninety days of the Paris Conference in order to develop the national approach.

Following the Liberal majority victory on October 19th, Prime Minister Trudeau announced that he would be attending COP21 along with a delegation comprising provincial representation. Further, his government hosted a First Ministers meeting during the week prior to COP21, in order to discuss its approach to the Paris conference. It was made clear that because of the limited time, Canada would be going to Paris with the same INDC that was submitted under the previous government, which committed the country to a 30% reduction of GHG emissions below 2005 levels by 2030.

COP21, which took place November 30 – December 11, saw more than 150 Heads of State join together to show their respective nation’s support for a positive outcome to the talks; ideally, a new legally binding, international agreement on climate change post-2020 that would see all countries pledge to take real action to curb emissions.

After two weeks of negotiation, the Paris Agreement was reached by 195 countries. The Agreement comprises two parts – the agreement that is legally binding and the Paris Decision, which passes the agreement and sets out a number of less legally binding ways to observe and approach it.

Highlights of the Agreement, which will take effect in 2020, include:

- Hold the increase in the global average temperature to well below 2 degrees Celsius above pre-industrial levels, and to pursue efforts to limit the temperature increase to 1.5 degree Celsius. (Article 2, Section 1)

- Countries should reach global peaking of GHGs emission as soon as possible, recognizing that peaking will take longer for developing countries (Article 4, Section 1)

- Acknowledge the importance of averting, minimizing and addressing loss and damage associate with the adverse effects of climate change, especially to climate-threatened developing countries. (Article 8)

- Tools to accelerate links between carbon pricing systems, including rules for accounting of emission reduction units, and a new crediting mechanism, and provisions to facilitate cross-border transfers. (Article 6)

- With respect to the INDCs that were submitted, countries must submit updated plans that would ratchet up the stringency of emissions by 2020 and every five year thereafter; further a global stocktaking will take place every five years, starting in 2023. (Article 14)

- Countries are required to monitor, verify and report their GHG emissions using the same global system – the details of which are to be determined at a later date. (Article 13)

- A new collective call to nations to establish a goal of at least $100 billion a year in climate-related financing by 2020. This promise was made in 2009; the $100 billion figure is meant to be the bare minimum. (Item 115 of the Paris decision)

- A commitment by all countries to set ‘the highest possible ambition’ when it comes to national targets.

The Agreement will enter into force once more than 55 countries have ratified it, and more than 55% of total global GHGs are covered.

The federal government, having played an important role in Paris in the negotiations, will now need to balance its international obligations with its commitment to work with the provinces towards a national climate strategy by March/April 2016. Given that many of the provinces have moved forward with their own climate change strategies and in some cases, carbon pricing regimes, the federal government will find that despite the resurgent momentum towards a national approach, provinces will undoubtedly want to protect their industries and economy. The federal government will need to apply some of the same shuttle diplomacy it demonstrated in Paris with its own counterparts in Canada.

In closing, Sussex will continue to closely monitor the progress of the climate change file on all levels of government on behalf of its clients. It will become increasingly important for stakeholders to understand that governments will begin to incorporate broader climate change-related initiatives across a variety of portfolios.

Sussex will be pleased to assist your organization or company navigates this process through 2016.

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