On April 3, 2017 Ontario announced the results of its first auction of greenhouse gas emissions allowances (GHG Auction) that was held March 22, 2017.

The cap and trade program has a market cycle consisting of compliance periods. In each compliance period there are emission allowance distributions, auctions, emissions reporting deadlines, and one single "true-up" (this is where the Capped Participant submits the required number of its emission allowances and credits for the compliance period to the Minister).

Ontario Regulation 452/09 requires certain specified industrial facilities in Ontario to report their GHG emissions to the province on an annual basis. Prior to June 1st of each year, GHG emissions from these facilities must be reported if (i) the emissions are equal to or greater than 10,000 tonnes of CO2e in a year (or exceeds another reporting threshold), and (ii) the GHGs come from specified activities. The regulation also requires facilities that emit 25,000 tonnes or more of CO2e, or that import electricity, or distribute 200 litres or more of petroleum product, or distribute an amount of natural gas that if consumed would emit 25,000 tonnes or more of CO2e to have an accredited organization verify their report prior to submitting it to the Minister.

The auction resulted in a total of 25,296,367 2017 allowances being sold at a price of $18.08 each and a total of 812,000 future (2020) greenhouse gas emissions being sold at a price of $18.07 each. A total of $472,031,155 was generated in proceeds to be invested in programs to reduce greenhouse gases and assist in reducing emissions through the Province's Climate Change Action Plan. Ontario has committed approximately $325 million to the Green Investment Fund to promote climate change actions. The details of the auction results can be found in the Ministry of Environment and Climate Change's Summary Results Report.

There are mandatory participants in the cap-and-trade program that must have enough allowances to equal their emissions at the end of each compliance period. Any company that requires additional allowances to match their emissions has the ability to purchase allowances on the secondary market. The secondary market is where the following transactions are permitted: (i) the purchase and sale of emissions allowances that have already been distributed to a Capped Participant; (ii) the purchase and sale of early reduction and offset credits; and, (iii) the purchase and sale of derivative financial products.

GHG Auctions will be held four times per year during the 2017 – 2020 compliance period. The MOECC has stated that the key indicator of the success of the cap-and-trade program will be the reduction of GHG emissions.

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