GHG emission caps

Ontario has set caps on total emissions from the covered sectors for 2017 to 2030. The initial cap in 2017 is set at 142,332,000 to align with the best estimate of emissions for that year. The cap declines annually to support the province achieving its 2020 and 2030 greenhouse gas (GHG) pollution reduction targets. Emission allowances will be created in an amount equal to the cap and either sold or provided free of charge to Ontario emitters.

GHG emission allowances

Under the cap and trade program regulation, GHG emission allowances authorize capped emitters to release a specified quantity of carbon dioxide equivalent (CO2e). The total number of allowances available is equal to the overall emissions cap. One allowance is equal to one tonne of carbon dioxide equivalent.

Distribution of allowances free of charge

In the first compliance period (2017-2020), eligible capped emitters will receive emission allowances free of charge, but the rate of free allowances is expected to decrease over time.

Providing allowances free of charge to industry can help companies transition to greener technology while they reduce greenhouse gas pollution. It also makes complying with cap and trade manageable for industries with competitors in other jurisdictions that have not yet put a price on carbon.

Providing allowances free of charge is a transitional measure. Ontario intends to re-assess for future compliance periods. The rate of allowances being distributed free of charge to eligible capped emitters for the first compliance period will decline over time at a rate of 4.57% per year for combustion emissions starting in 2018. Companies will need to either take action to reduce their emissions or purchase allowances or credits.

Allowances will not be given free of charge to fuel suppliers/distributors, electricity importers and most electricity generators. These companies will need to purchase allowances at auction or from the secondary market.

Apply for emission allowances free of charge

You can apply for a distribution of emission allowances free of charge if you meet certain criteria. This includes both mandatory and voluntary cap and trade participants that are not:

  • electricity generators or involved in electricity importation and transmission
  • producing or supplying petroleum
  • distributing natural gas

You must submit an application for emission allowances free of charge each year.

Application deadline for 2019

The deadline to apply for 2019 vintage allowances free of charge is September 8, 2018. Applications will not be accepted after this deadline has passed.

For participants already registered in the cap and trade program:

If you are applying for emission allowances free of charge in 2018 for 2019 vintage allowances, you must:

For new participants not yet registered in the cap and trade program:

If you are applying for emission allowances free of charge in 2018, you must:

  • be registered or be required to register as a mandatory participant;
  • be registered as a voluntary participant by September 1 of the year of the application;
  • be registered and approved as a capped participant in CITSS;
  • submit an application for 2019 emission allowances (Please contact Ontario cap and trade applications for this form.)

If you intend to register as a participant in the cap and trade program:

There are a number of steps to register as a participant in CITSS. If you’re registering to participate in the program, you should carefully review guidance relating to program registration, and get started on the process as soon as possible. Please contact the Ontario Cap and Trade Help Desk for any questions relating to CITSS registration.

For new voluntary participants

September 1 is the annual deadline for voluntary participants to register in the program. Voluntary participants must take a a number of steps to complete registration, including submitting a voluntary participant registration form. Participants wishing to be registered in time to be eligible to receive allowances free of charge should get started on the process as soon as possible. Please contact the Ontario Cap and Trade Help Desk for any questions relating to registration as a voluntary participant in CITSS.

Find detailed eligibility criteria

See section 85 of the Cap and Trade Program Regulation (O. Reg. 144/16) and Methodology For The Distribution of Ontario Emission Allowances Free Of Charge dated November 2017 for more detailed eligibility criteria.

Compliance period

A compliance period is when the compliance obligation is calculated. At the end of each compliance period, each facility must turn in:

  • allowances,
  • early reduction credits or
  • a limited number of offset credits, equivalent to their total verified GHG emissions throughout the compliance period.

The first compliance period for Ontario’s cap and trade program is January 1, 2017, to December 31, 2020.

Compliance and enforcement

Ontario has worked with stakeholders to develop comprehensive rules to ensure integrity, accountability and transparency of the province’s cap and trade program. These rules, detailed in the Cap and Trade Regulation, also help protect all program participants the public from fraud and misuse of the program.

Ontario has finalized an administrative penalties regulation. Administrative penalties are tools Ontario can use to help ensure compliance with the legislation and its regulations, and prevent anyone from deriving an economic benefit from not complying.

Early reduction credits

Ontario intends to recognize and reward early action taken by businesses to reduce emissions by issuing early reduction credits.

The province intends to use guidelines developed by the Western Climate Initiative (WCI) to develop the appropriate formula. Ontario proposed a framework on early reduction credits as part of the cap and trade regulatory proposal that was posted to the Environmental Registry on February 25, 2016. Ontario plans to engage further on the rules for early reduction credits in 2018.

Legislation and Regulations

The Climate Change Mitigation and Low-carbon Economy Act, 2016:

  • provides the legal foundation for the cap and trade program that will help reduce greenhouse gas emissions across the economy
  • directs all cap and trade auction proceeds to a new Greenhouse Gas Reduction Account to fund green initiatives that reduce or support reduction of greenhouse gas emissions.
  • requires a comprehensive climate change action plan , which includes an assessment of potential greenhouse gas emission reductions and cost per tonne of those potential reductions.
  • establishes in law Ontario’s greenhouse gas reduction targets of 15% below 1990 levels by 2020, 37% below 1990 levels by 2030 and 80% below 1990 levels by 2050
  • provides a framework for reviewing and increasing the stringency of targets, and establishing interim targets

The act also includes strong compliance and enforcement provisions for the province’s cap and trade program, and facilitates linking Ontario’s program with other jurisdictions, including Quebec and California.


Ontario’s Cap and Trade Program Regulation took effect July 1, 2016. The regulation includes:

  • detailed rules and obligations for businesses participating in the program
  • compliance and enforcement provisions to ensure accountability, transparency and to guard against fraud

The final design was informed by extensive consultation with businesses, industry, the public and environmental organizations. The province also engaged Indigenous communities about the regulation, and has committed to continuing these discussions. In November 2017, the regulation was amended to provide for linking with Quebec and California’s carbon market as of January 1, 2018.