Bill to cancel cap-and-trade program may also reimburse some former participants
Corporations in Ontario should be aware that the province's new Progressive Conservative government has introduced legislation to repeal the provincial carbon tax. Ontario Bill 4, which received first reading on July 25, 2018, includes changes to cancel the province's cap-and-trade program and reimburse eligible participants who have already made payments under the program. This bill follows the revocation of the cap and trade program regulations and the prohibition against further trading of emissions allowances, effective July 3, 2018 (ON Reg. 386/18).
It's not yet clear whether Finance's "backstop" carbon tax legislation will apply now that Ontario has reversed course on implementing a provincial carbon pricing system. Although most provinces, including Quebec, Alberta and British Columbia, have adopted their own carbon levies, Finance released "backstop" carbon tax legislation intended to "top-up" provincial levies that do not meet federal thresholds. The federal legislation would apply to any province or territory that does not implement a carbon pricing system before 2019 that meets the federal standards. Saskatchewan has also not introduced such a program.
Ontario implemented a cap-and-trade program to reduce greenhouse gas emissions that took effect on January 1, 2017. The program capped greenhouse gas emissions, created tradable emissions allowances for a given period and required covered emitters to hold allowances equal to their emissions in that period.
Ontario cancelling cap-and-trade program
Ontario's new legislation repeals the existing Climate Change and Low-Carbon Economy Act, 2016, and cancels or retires the cap and trade instruments. The new rules also provide that certain taxpayers who participated in the cap and trade program may be eligible for compensation, subject to a number of limits, with further details to be provided by regulation.
The new legislation also introduces changes to require the province to establish targets to reduce greenhouse gas emission and to prepare and implement a climate change plan.
For more information, contact your KPMG adviser.
Information is current to July 31, 2018. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500