The Ministry of Environment, Conservation, and Parks (MECP) announced on August 26, 2022, proposed amendments to Ontario’s Emissions Performance Standards (EPS) to regulate greenhouse gas. See Environmental Registry of Ontario Number 019-5769. Also, see “Proposed Regulatory Amendments for Emissions Performance Standards Program 2023-2030 Summer 2022.”
These changes are necessary to comply with the federal Output-Based Pricing System.
The official proposal summary states, “We are proposing changes to the Emissions Performance Standards program for 2023-2030 to meet the benchmark set by the federal government. The EPS program will continue to be a fair, cost-effective program that reduces emissions and is flexible to the unique needs and circumstances of industry in Ontario, while supporting green economic growth.”
Ontario’s current EPS only applies to this year (2022), thus the need for amendments.
Federal Pricing of Carbon
Under the federal Greenhouse Gas Pollution Pricing Act (GGPPA), the federal government assesses provincial and territorial carbon pricing programs against a benchmark. The federal benchmark for 2023-2030, which was released in August 2021 includes new criteria and tests that provincial and territorial carbon pricing programs must meet.
The federal government announced that the price on carbon across Canada must be a minimum of $65 per tCO2e in 2023 rising by $15 per year to $170 per tCO2e in 2030. The MECP is proposing to align the provincial pricing with the federal pricing.
Ontario’s EPS Framework
The regulatory framework for the EPS program can be found in the following:
- Ontario Regulation 241/19: Greenhouse Gas Emissions Performance Standards regulation (O. Reg. 241/19 or EPS Regulation)
- GHG Emissions Performance Standards and Methodology for the Determination of the Total Annual Emissions Limit (the EPS Methodology), which sets out the methods for determining the Total Annual Emissions Limit (TAEL)
Ontario established the EPS in January 2022 as an alternative to the federal Output Based Pricing System (OBPS).
As stated in a blog post by Osler, “These standards will become more stringent over time and require facilities to reduce their emissions or pay a carbon price if they exceed their emissions limit. The objective of the EPS program is to encourage GHG emission reductions from large industrial emitters while maintaining competitiveness of Ontario businesses and minimizing carbon leakage.”
Carbon leakage is defined by the Government of Canada as “Carbon leakage is the effect of carbon costs that cause companies or investors to move production to jurisdictions with lower costs. The result is that emissions are not reduced; they are just emitted in a different location. As such, carbon leakage can undermine the goals of carbon pricing from an environmental standpoint.”
Who Must Register in Ontario
You are required by law to register your EPS facility in the Emissions Performance Standards program if it meets the definition of an “EPS facility” and the following criteria under section 2 of O. Reg. 241/19:
- the owner or operator of the EPS facility was required to report the facility’s greenhouse gas emissions for 2014 or for any subsequent year
- the facility reported 50,000 tonnes or more of CO2 emissions in one or more reporting years from 2014 onward
- the primary activity at the facility is an industrial activity listed in paragraphs 1 to 38 of Schedule 2 of O. Reg. 241/19
If you meet the eligibility criteria listed, you are required to register in the year that you meet the requirements.
Quoting again from Osler, “The EPS program applies to industrial facilities with annual emissions of at least 50,000 tonnes of carbon dioxide equivalent (tCO2e) in the sectors regulated by the OBPS. Regulated sectors are identified in the GGEPS Regulation as including cement, chemicals, electricity generation, food (specifically sugar and corn milling), industrial, food and fuel ethanol, metal tubes and steel, lime, metal mining or milling, mineral products, natural gas liquids, natural gas transmission, non-ferrous metal smelting and refining, petroleum refineries, oilseeds processing, pulp and paper, upstream oil extraction and upgrading and vehicle manufacturing.”
Feedback on Ontario’s EPS
The Ontario government is seeking feedback on the following components of the proposed amendments to the EPS program:
- carbon price
- program scope
- registration and cessation of coverage
- emissions performance standards
- electricity generation and cogeneration
- stringency factors
- other administrative and technical changes
- carbon leakage and related competitiveness assessment
- public reporting
Interested parties can submit comments before the October 10th deadline.
With respect to the economic impact, the Ontario government states, “The present value of the cumulative cost savings to regulated industry are estimated to be approximately $1.1 billion for 2023-2030 period.”
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