The Ontario government has incorporated several documents and regulatory changes to ensure a “smooth transition” for industry to the EPS program, coming into effect on January 1, 2022. The Ontario Emissions Performance Standards (EPS) is a program ensuring that polluters are accountable for greenhouse gas emissions by applying “emissions performance standards” to determine a limit of greenhouse gas (GHG) emissions that industrial facilities are required to meet each year.
On our previous blog on the “Overview of the Ontario Emissions Performance Standards (EPS)” we have covered important content regarding the participation of the EPS program, GHG emission limits and reporting. This blog with relevant information blog can be found here.
In this blog we will cover Ontario’s transition to the EPS program and the regulatory amendments to this date.
Ontario Emission Performance Standards: the Transition to the EPS
On June 21, 2018, the federal government enacted the Greenhouse Gas Pollution Pricing Act (GGPPA) to set minimum national standards for carbon prices on provinces and territories that do not meet the requirements. As a response to the federal GGPPA, the Ontario government created its own program in July 2019: the Ontario Emissions Performance Standards (EPS). This program is substituting and covering the scope of the previous federal Output-Based Pricing System (OBPS).
On September 20, 2020, the Ontario EPS program was accepted by the Government of Canada. This suggests that Ontario industrial emitters currently subject to the federal output-based pricing system, will have to transition into the EPS program starting January 1 2022. However, for a “smooth transition”, the compliance obligations will continue to apply under the previous OBPS program for emissions occurring between 2019, 2020 and 2021 (until the transition has been completed).
The EPS program will apply to industrial facilities with more than 50,000 tonnes or more of CO2e emissions in a listed industrial facility or regulated sector. This includes electricity generation, industrial, food and fuel, metal tubes, steel, metal mining or milling, mineral products, natural gas liquids, natural gas transmissions, non-ferrous metal smelting and refining, etc. Those facilities that were required to report their GHG emissions for 2014 and subsequent years are required to participate in the EPS program. Facilities with annual emissions between 10,000 and 50,000 tCO2e will be allowed to participate in the EPS program on a voluntary basis.
Determination of the Total Annual Emissions Limit
According to the GHG Emissions Performance Standards and Methodology for the Determination of the Total Annual Emissions Limit , facilities that exceed the carbon price annual emissions limit will have to pay a fee. Factors that could influence the total annual emissions include the historical emissions and the intensity.
Under the Greenhouse Gas Emissions: Quantification, Reporting and Verification Regulation (the Reporting Regulation), some facilitates are required to report their annual GHG emissions to Ontario’s Ministry of the Environment, Conservation and Parks. Facilities that engage in 10,000 tCO2e per year. This applies to all facilities, even if they are covered by the EPS program. If covered by the EPS program, these facilities should have their GHG reports verified by a third-party.
Compliance Obligation: the GHGEPS
For covered facilities, the net present value of cost savings with the full implementation of the EPS is $105 million for 2022, calculated as the difference between total compliance costs under the EPS program and the federal OBPS. Covered facilities can either reduce its GHG emissions or they can submit a compliance instrument. There are two instruments: excess emissions units & emissions performance units. Excess emissions units are non-tradable and must be purchased at a price of $40 per tCO2e for 2022 and $50 per tCO2e in 2023 from the Ontario government. Emission performance units can banked or traded with other covered facilities for up to five years, or between facilities´ accounts by agreement.
Compliance obligations will continue to apply under the OBPS
The Regulatory Amendments
Ontario Regulation 729/31
Amended the GGEPS was originally posted for public consultation on the Environmental Registry of Ontario from May 27, 2021 to July 11, 2021. Specifically, the amendments made regarding this proposal include:
- providing a three-year compliance exemption for most new facilities (excluding those where primary industrial activity is generating electricity using fossil fuel)
- supporting the partial year coverage of emissions for facilities that register part way in a year – these adjustments were made or both the Methodology for the Total Annual Emissions Limit calculations and the Guideline for emissions calculations
- adjusting the performance standard for electricity sector to 370 CO2e/GWh
- clarifying the application of the cogeneration standard to ensure facilities are applying it in a consistent manner that aligns with the 80% efficient cogeneration system policy
- other administrative, technical and clarifying amendments
Ontario Regulation 730/21
The regulations that have been amended are the following:
- Beginning compliance obligations for covered facilities that are registered or required to register under the EPS program on January 1, 2022.
- Allowing partial year coverage of emissions for facilities registering part way in a year. These adjustments were made both to the incorporated methodology and the guideline.
- Adding eight new sectors to the EPS program
- Allowing for the collection of additional information to support the exemption of covered facilities from the federal fuel charge.
More information can be found here
Next Steps for updates on the Ontario Emission Performance Standards
Industries and regulated emitters that are required to comply with the obligations starting on January 1, 2022, should ensure that they are taking the necessary measures to transition from the OBPS to the EPS program standards. The Ontario government has stated that they will work with the federal government to ensure a smooth transition, as the EPS program will impose some additional administrative burdens on covered facilities. Also, the Ontario government has introduced flexibility and some exemptions for new facilities.
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