Home > At Issue > – The Liberal ‘Cap and Trade’ program in Ontario – How it works & how it affects you

The Liberal ‘Cap and Trade’ program in Ontario – How it works & how it affects you

The cap and trade program is a central part of Ontario’s solution to fight climate change. It is a market-based system that sets a hard cap on greenhouse gas emissions while giving flexibility to businesses and industry in terms of how they meet their caps.

Putting a price on carbon encourages companies and consumers to make better choices for the environment. It gives polluters an incentive to cut emissions – if you pollute less, you pay less.


The cap limits how many tonnes of greenhouse gas pollution businesses and institutions can emit. The cap drops each year to encourage lower emissions.

Companies must have enough allowances (also known as permits or credits) to cover their emissions if they exceed the cap.

To comply, companies can generally:

  • invest in clean technologies to become more efficient
  • switch to lower carbon fuels
  • purchase additional credits


Companies can trade (buy or sell) allowances. For example, if a company emits more greenhouse gas emissions than permitted by the cap, it could buy credits in order to comply. Credits would be available for purchase from a company that reduced its greenhouse gas emissions and have surplus credits.

Key facts:

  • began January 1, 2017
  • caps the amount of greenhouse gas emissions Ontario’s homes and businesses can emit, and lowers that limit over time
  • will cost the average Ontario household about $13 more per month to fuel a car and heat a home in 2017
  • proceeds from cap and trade will be invested into projects to help families lower their energy costs and save money
  • first auction was March 22, 2017

Greenhouse gases cause climate change and cost consumers

Greenhouse gases cause global warming. In July 2016, global temperatures were the warmest on record. To fight climate change, we must lower our greenhouse gas emissions.

Greenhouse gases are the pollutants, like carbon dioxide, that come from burning fossil fuels. They come from factories, cars, trucks, home furnaces and other sources.

Every year, millions of tonnes of greenhouse gases are pumped into the air with almost no cost to emitters.


The proceeds from Ontario’s cap and trade program will benefit homeowners and the economy.

Cap and trade is projected to generate about $1.9 billion per year in proceeds. Ontario will invest this into programs that save homeowners energy and money.

By law, every dollar collected through cap and trade must be invested – in a transparent way – back into projects that reduce greenhouse gas pollution, such as:

  • public transit
  • electric vehicle incentives
  • social housing retrofits

Industries can invest in new clean technologies to reduce their carbon costs. Researchers, entrepreneurs and start-ups will benefit as their new technologies are needed to meet the challenge. This will bring jobs and economic benefits in the growing global market for climate-friendly products.

Ontario has already committed $325 million to the Green Investment Fund for projects that will fight climate change, grow the economy and create jobs. These investments are part of our plan to secure a healthy, clean and prosperous low-carbon future.

How cap and trade affects you

In 2017, cap and trade will cost the average Ontario household about $13 more per month to fuel a car and heat a home.

Home electricity prices

Cap and trade will not make your electricity more expensive. The electricity we consume every day is 90% emissions-free, thanks in part to Ontario’s early action to close coal-fired power generation.