Ontario's Emissions Performance Standards ("EPS") program began replacing the federal Output-Based Pricing System ("OBPS") for greenhouse gas ("GHG") emissions regulation on January 1, 2022. On October 22, 2021, Ontario amended two regulations under the Ontario Environmental Protection Act ("EPA") in order to facilitate the transition: the Greenhouse Gas Emissions Performance Standards regulation ("EPS Regulation") and the Greenhouse Gas Emissions: Quantification, Reporting and Verification regulation ("Reporting Regulation") (collectively with EPS Regulation, the "Amendments").

In addition to preventing Ontario industrial sites from being taxed twice for the same emissions under the EPS program and the OBPS, the Amendments were designed to ensure that there is no pricing gap for emissions during the transition period. Simply said, payment obligations under the OBPS will only be with respect to emissions up to December 31, 2021, even if reporting periods for both programs may overlap. Conversely, the EPS program's payment responsibilities started on January 1, 2022.

Following the completion of all OBPS obligations for the 2021 compliance period, only the EPS program will continue to be applicable to sites in Ontario. Whether a facility is required to register with the EPS program depends on the nature of its industrial activities and its quantum of annual GHG emissions.

To comply with the EPS program and the related requirements, facilities are currently required to:

  • submit a GHG report for the previous year;
  • submit a verification statement and verification report regarding the GHG report;
  • have the number of compliance instruments in their EPS account equal to their compliance obligation, if applicable; and
  • if there is a shortfall, meet an additional compliance obligation.

December 15, 2022, is the regular-rate compensation deadline for the 2021 compliance period. Compensation provided after this date will be subject to the increased (4:1) compensation rate. As such it is essential for Ontario sites currently operating under OBPS, to transition to the EPS program before this deadline. Surplus credits issued to a facility in Ontario will not be eligible for remittance as compensation for the 2022 or subsequent compliance periods.

With the federal government's increase in the benchmark compliance price under the Greenhouse Gas Pollution Pricing Act by $15/tonne per year, beginning in 2023 to reach $170 per tonne by 2030, it is anticipated that Ontario's EPS program will increase in lock-step in order to maintain federal stringency requirements.

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