Ontario Industrial EPS Proposal IETA Insights for Ontario Stakeholders Clean Economy Alliance Webinar 15 March 2019 Toronto, Canada

About IETA Collective voice of business on carbon pricing, markets and finance Global non-profit association Policy design, thought leadership, global capacity building, best practices, knowledge transfer Global Partnerships & Dialogues with UNFCCC, World Bank, OECD-IEA and many, many more!

IETA Core Business Messages Climate Results (Environmental Outcomes) Matter Real, measurable GHG reduction outcomes. Least-Cost Options & Compliance Flexibilities Driving real reductions at least-cost to consumers & business Compliance flexibilities (trading, linking, offsets) Policy Certainty & Stability Clear, consistent pathways and signals for compliance and investment Ensuring Competitiveness Leveling the playing field with trade partners and competitors Avoiding Regulatory Overlap & Duplication Ensure true complementarity across supplementary policies

The (Bigger) Known Unknowns… Constitutional Reference Cases Federal OBPS Final Performance Standards? Federal Market Infrastructure and Participation? Eligible Offsets? What? From Where? Vintage? International “Recognized Units”? Usage Constraints? CFS Interactions? Alberta Election Becomes All or Partial Backstop Jurisdiction? Federal Election “International Cooperation” Outlooks?

Overview: Constitutional Reference Cases (SK-ON) SK/ON position: federal carbon price seen as unconstitutional Saskatchewan hearing took place on 13-14 February 2019 Ontario hearing scheduled for 15-18 April 2019 Clarity by end of Spring 2019? Then likely Supreme Court time… Issues Cases are precedent-setting – addressing core elements of constitution Policy uncertainty and government disorganization causing significant financial and investment uncertainty and risk IETA as Intervenor Accepted by both courts to intervene in the constitutional reference cases IETA is the only official business intervenor in both cases Multi-sector business voice supporting climate action and policy stability

IETA Messaging: OBPS Design & Implementation High-Level Messages Support flexible compliance and cost-effective approach Enable market linkages and Pan-Canadian “cooperation” Complement and leverage existing programs Recognize use of offsets and credits from existing systems Complement international rules and systems Consider broader cumulative impacts More Detailed Input on Proposed OBPS Regulatory Framework Usage and expiry limits on compliance units Voluntary participation and early opt-in Non-facility market participation Commitment to a federal offset system Treatment of electricity under the output-based standard

IETA Messaging: Ontario Proposal Support flexible compliance and cost-effective approach Enhance economic performance and preserve competitiveness Blend private and public revenue to support low-carbon transition and drive deeper reductions Avoid duplicative and non-complementary measures Enable policy harmonization and alignment Develop a robust, collaborative carbon offsets program that diversifies and balances the economy Ensure complementarity with international rules and systems

IETA Messaging: “International Cooperation” Paris Agreement Markets’ Provisions (Article 6) Cooperative Approaches – accounting for ITMOs Decisions still playing out through COP25 Opportunities for Canada? Holds significant potential to reduce emissions and enhance ambition IETA Article 6 Project - estimated annual potential in cost savings: 2030 = ~ $330 billion (CA$ 2015) 2050 = ~$460 billion (CA$ 2015) 2100 = ~ $1.3 trillion (CA$ 2015)

Pan-Hemispheric Carbon Pricing Cooperation