Regulations Amending the Output-Based Pricing System Regulations and the Environmental Violations Administrative Monetary Penalties Regulations: SOR/2021-197

Canada Gazette, Part II, Volume 155, Number 18

Registration
SOR/2021-197 August 12, 2021

GREENHOUSE GAS POLLUTION PRICING ACT

ENVIRONMENTAL VIOLATIONS ADMINISTRATIVE MONETARY PENALTIES ACT

P.C. 2021-867 August 11, 2021

Her Excellency the Governor General in Council, on the recommendation of the Minister of the Environment, makes the annexed Regulations Amending the Output-Based Pricing System Regulations and the Environmental Violations Administrative Monetary Penalties Regulations pursuant to

  • (a) sections 192 and 193 of the Greenhouse Gas Pollution Pricing Actfootnote a; and
  • (b) section 5footnote b of the Environmental Violations Administrative Monetary Penalties Actfootnote c.

Regulations Amending the Output-Based Pricing System Regulations and the Environmental Violations Administrative Monetary Penalties Regulations

Output-Based Pricing System Regulations

1 (1) Subsection 2(1) of the Output-Based Pricing System Regulationsfootnote 1 is amended by adding the following in alphabetical order:

2020 GHGRP
means the document entitled Greenhouse Gas Reporting Program, Canada's Greenhouse Gas Quantification Requirements, the December 2020 version, published by the Department of the Environment. (méthode d'ECCC 2020)
ANSI National Accreditation Board
means the accreditation organization that is a subsidiary of the American National Standards Institute. (ANSI National Accreditation Board)

(2) Subsection 2(2) of the Regulations is replaced by the following:

Incorporation by reference

(2) Unless otherwise indicated, a reference to any document incorporated by reference into these Regulations, except the ISO Standard 14065, the GHGRP and the 2020 GHGRP, is incorporated as amended from time to time.

2 Subsection 6(1) of the Regulations is replaced by the following:

Condition not met

6 (1) If a covered facility was designated on the condition that it would emit a quantity of GHGs of at least 10 kt of CO2e in any of the three calendar years following the date of first production, the Minister may cancel the designation under subsection 172(3) of the Act if the facility has not met that condition as of December 31 of the third calendar year following that date.

3 Subsection 7(3) of the Regulations is repealed.

4 The Regulations are amended by adding the following after section 7:

Requirements for partial compliance period

7.1 If a facility ceases to be a covered facility during a compliance period, the person who is responsible for that facility must comply with the requirements in Division 1 of Part 2 of the Act and these Regulations in respect of the portion of that compliance period during which it was a covered facility.

5 Subsection 9(2) of the Regulations is replaced by the following:

Partial compliance period

(2) If a facility becomes a covered facility under the Act after January 1 of a given calendar year, its specified period, for the purposes of the definition compliance period in section 169 of the Act, for that year begins on

  • (a) in the case of a covered facility that is located in a province whose name is listed in Part 1 of Schedule 1 to the Act, the effective date of registration that is indicated in the Minister of National Revenue's notice under subsection 64(2) of the Act for the covered facility in question; or
  • (b) in the case of a covered facility that is located in a province whose name is not listed in Part 1 of Schedule 1 to the Act, the date of registration that is specified in the covered facility certificate issued under subsection 171(2) of the Act.

6 The Regulations are amended by adding the following after section 10:

Conclusive presumption

10.1 (1) If a facility ceases to be a covered facility, the person responsible for that facility is deemed to be responsible for a covered facility with respect to

  • (a) the requirements set out in section 173 of the Act;
  • (b) the requirements set out in section 174 of the Act with respect to providing compensation;
  • (c) the requirement under subsection 176(1) of the Act to notify the Minister of any errors or omissions;
  • (d) the requirement under subsection 176(2) or 177(2) of the Act to submit any corrected report under section 62 or 63, respectively;
  • (e) the requirement under paragraph 178(1)(a) of the Act to provide any compensation;
  • (f) the requirements set out in section 181 of the Act;
  • (g) the requirement to maintain the OBPS account referred to in section 14;
  • (h) the requirement under subsection 187(5) of the Act to retain the information set out in section 47; and
  • (i) the requirement to notify the Minister if there is a change in the person responsible, in accordance with subsection 48(1).

Period of requirements

(2) The requirements set out in paragraphs (1)(a) to (g) apply during the period necessary under the Act and the requirements set out in paragraphs (1)(h) and (i) apply during a period of seven years after the end of the year in which the facility ceased to be a covered facility.

Surplus credits

(3) If a facility ceases to be a covered facility, the person responsible for that facility is deemed to be responsible for a covered facility for the purpose of obtaining surplus credits under section 175 of the Act and paragraph 178(1)(b) of the Act.

7 (1) The portion of paragraph 11(1)(c) of the French version of the Regulations before subparagraph (i) is replaced by the following:

  • c) s'agissant d'une installation assujettie où sont exercées d'une part l'activité industrielle visée de production de charbon à partir de l'exploitation de gisement de charbon et d'autre part, si elle est constituée d'un groupe ou d'un ensemble de groupes enregistrés en vertu du Règlement sur la réduction des émissions de dioxyde de carbone – secteur de l'électricité thermique au charbon, celle de production d'électricité :

(2) Paragraph 11(1.2)(a) of the Regulations is replaced by the following:

  • (a) for each unit whose electricity generation capacity from gaseous fuels was increased by 50 MW or more and that is designed to operate at a thermal energy to electricity ratio of less than 0.9, the gross amount of electricity generated during the compliance period by each unit that is attributed to the capacity added to the unit and the gross amount of electricity generated that is attributed to the capacity of the unit before the additional capacity was added, in accordance with section 32 and subsection 41.2(3), separately; and

8 Section 16 of the Regulations is amended by adding the following after subsection (7):

Pyrometallurgical smelting and refining of lead

(7.1) If lead is pyrometallurgically smelted and refined at a covered facility where a specified industrial activity set out in paragraph 23(c), column 1, of Schedule 1 is engaged in, the following rules apply:

  • (a) for the purposes of section 17, the person responsible for the covered facility must quantify the GHGs from the pyrometallurgical smelting and refining of lead in accordance with the method applicable to the industrial activity set out in paragraph 23(c), column 1, of Schedule 1; and
  • (b) for the purposes of sections 31, 36 and 36.2, the industrial activity set out in paragraph 23(b), column 1, of Schedule 1 is deemed not to be engaged in at the covered facility.

9 Section 17 of the Regulations is amended by adding the following after subsection (4):

Emission factors — details

(4.1) For the purposes of subsection (2), if the quantities of the GHGs are calculated in accordance with the GHGRP 2.A or 2.B, the emission factor tables set out in that method are replaced by those set out in the 2020 GHGRP.

10 Section 24 of the Regulations is repealed.

11 Section 33 of the Regulations is repealed.

12 (1) The portion of subsection 35(2) of the Regulations before paragraph (a) is replaced by the following:

CO2 — quantity that may be subtracted

(2) For the purposes of the description of B in subsection (1), the quantity of CO2 may only be included in that description if it has been included in the description of A and has been permanently stored in a storage project that meets the following criteria:

(2) Subsection 35(4) of the Regulations is replaced by the following:

Deemed emission of CO2

(4) For greater certainty, the quantity of CO2 from a covered facility that has been captured but has not been permanently stored in a storage project that meets the requirements of subsection (2) is deemed to have been emitted by the covered facility and is included in the quantity of GHGs that are included in the description of A in subsection (1).

13 (1) The description of O in paragraph (a) of the description of B in subsection 37(1) of the English version of the Regulations is replaced by the following:

  • O is the ratio of heat from the combustion of fossil fuels to produce thermal energy for reference year “i” and is
    • (i) if M is greater than N, the ratio of heat determined under section 34 for reference year “i” for the covered facility, or
    • (ii) if M is less than N, the ratio of heat determined under section 34 for reference year “i” for the covered facility from which the thermal energy was purchased, or

(2) Paragraph (b) of the description of B in subsection 37(1) of the Regulations is replaced by the following:

  • (b) 0 for all reference years if the absolute value of the quotient obtained by dividing the sum of the results determined under paragraph (a) for each reference year “i” by the number of reference years is less than the quotient determined by the formula:

The product of 0.015 by the quotient where the numerator is the sum of A for each reference year “i” and the denominator is n. – Text version below the image

Text version

The product of 0.015 by the quotient where the numerator is the sum of A for each reference year “i” and the denominator is n.

(3) Subsection 37(1) of the Regulations is amended by striking out “and” after the description of E, by adding “and” at the end of the description of i and adding the following after the description of i:

  • n the number of reference years.

14 The portion of subsection 41(2) of the Regulations before paragraph (b) is replaced by the following:

Output-based standard — exception

(2) The output-based standard applicable to the industrial activity set out in paragraph 38(a), column 1, of Schedule 1 applies to a boiler unit if it generates electricity using liquid or gaseous fuel and it

  • (a) is registered under the Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations, or it was at any given time in 2018; and

15 (1) The description of C in subsection 41.1(2) of the Regulations is replaced by the following:

  • C is, for each unit “k” within the electricity generation facility that generates electricity from gaseous fuels, that has an electricity generation capacity equal to or greater than 50 MW and that is designed to operate at a thermal energy to electricity ratio of less than 0.9, the gross amount of electricity generated during the compliance period from the specified industrial activity set out in paragraph 38(c), column 1, of Schedule 1 that is engaged in at the unit quantified in accordance with section 32;

(2) The description of E in subsection 41.1(2) of the Regulations is replaced by the following:

  • E is, for each unit “l” within the electricity generation facility generating electricity from gaseous fuels, that has an electricity generation capacity of less than 50 MW or is designed to operate at a thermal energy to electricity ratio of 0.9 or greater, the gross amount of electricity generated during the compliance period from the specified industrial activity set out in paragraph 38(c), column 1, of Schedule 1, that is engaged in at the unit quantified in accordance with section 32;

(3) The descriptions of k and l in subsection 41.1(2) of the Regulations are replaced by the following:

  • k is the kth unit, where “k” goes from 1 to r and where r is the total number of units within the electricity generation facility, generating electricity using gaseous fuel, that have an electricity generation capacity equal to or greater than 50 MW and are designed to operate at a thermal energy to electricity ratio of less than 0.9;
  • l is the lth unit, where “l” goes from 1 to s and where s is the total number of units within the electricity generation facility, generating electricity using gaseous fuel, that have an electricity generation capacity of less than 50 MW or are designed to operate at a thermal energy to electricity ratio of 0.9 or greater.

16 (1) Subsection 41.2(1) of the French version of the Regulations is replaced by the following:

Augmentation de la capacité de production d'électricité

41.2 (1) Si, le 1er janvier 2021 ou après cette date, la capacité de production d'électricité d'une installation de production d'électricité, à partir de combustibles gazeux, augmente de 50 MW ou plus et si cette capacité provient d'un groupe qui est conçu pour fonctionner à un rapport énergie thermique-électricité inférieur à 0,9, la personne responsable de l'installation est tenue de calculer, pour chaque période de conformité à partir de laquelle la capacité est augmentée, la limite d'émissions de gaz à effet de serre applicable à l'installation conformément au paragraphe (2).

(2) The description of C in subsection 41.2(2) of the Regulations is replaced by the following :

  • C is, for each unit “k” within the electricity generation facility that started generating electricity from gaseous fuels on or after January 1, 2021, that has an electricity generation capacity equal to or greater than 50 MW and that is designed to operate at a thermal energy to electricity ratio of less than 0.9, the gross amount of electricity generated during the compliance period from the specified industrial activity set out in paragraph 38(c), column 1, of Schedule 1 that is engaged in at the unit quantified in accordance with section 32;

(3) The descriptions of E and F in subsection 41.2(2) of the Regulations are replaced by the following :

  • E is, for each unit “l” that generated electricity from gaseous fuels within the electricity generation facility prior to the facility's increase in electricity generation capacity and whose electricity generation capacity was increased by 50 MW or more and that is designed to operate at a thermal energy to electricity ratio of less than 0.9, the gross amount of electricity generated during the compliance period that is attributed to the capacity added to a unit, from the specified industrial activity set out in paragraph 38(c), column 1, of Schedule 1 that is engaged in at the unit, quantified in accordance with section 32 and subsection (3);
  • F is, for each unit “l” that generated electricity from gaseous fuels within the electricity generation facility prior to the facility's increase in electricity generation capacity and whose electricity generation capacity was increased by 50 MW or more and that is designed to operate at a thermal energy to electricity ratio of less than 0.9, the gross amount of electricity generated during the compliance period that is attributed to the capacity of the unit before the additional capacity was added, from the specified industrial activity set out in paragraph 38(c), column 1, of Schedule 1, that is engaged in at the unit, quantified in accordance with section 32 and subsection (3);

(4) The descriptions of k and l in subsection 41.2(2) of the Regulations are replaced by the following :

  • k is the kth unit, where “k” goes from 1 to r and where r is the total number of units within the electricity generation facility that started generating electricity from gaseous fuels on or after January 1, 2021, that have an electricity generation capacity equal to or greater than 50 MW and that are designed to operate at a thermal energy to electricity ratio of less than 0.9; and
  • l is the lth unit, where “l” goes from 1 to s and where s is the total number of units that generated electricity from gaseous fuels within the electricity generation facility prior to the facility's increase in electricity generation capacity and whose electricity generation capacity was increased by 50 MW or more and that are designed to operate at a thermal energy to electricity ratio of less than 0.9.

17 Section 44 of the Regulations is amended by adding the following after subsection (1):

Rounding

(1.1) The result of the assessment in subsection (1) is to be rounded to the nearest whole number or, if the number is equidistant between two whole consecutive numbers, to the higher number.

18 Subsection 47(1) of the Regulations is replaced by the following:

Retention of information

47 (1) The person responsible for a covered facility must retain a record that contains the information set out in section 45, any information that the Minister specifies under subsection 187(2) of the Act and a copy of information submitted to the Minister under these Regulations, including any calculations, measurements and other data on which the information is based.

19 Subparagraph 49(1)(a)(i) of the Regulations is replaced by the following:

  • (i) it is accredited as a verification body to the ISO Standard 14065 by the Standards Council of Canada, the ANSI National Accreditation Board or any other accreditation organization that is a member of the International Accreditation Forum,

20 Section 50 of the Regulations is amended by adding the following after subsection (2):

Maximum number of verifications

(3) The person responsible for a covered facility must not have more than a total of six of its annual reports prepared under these Regulations for the same covered facility verified by the same verification body within a period of nine years.

21 Section 56 of the Regulations is replaced by the following:

Minimum percentage — charge

56 A minimum of 25% of the compensation that is required under section 174 of the Act must be provided by means of an excess emissions charge payment for each compliance period beginning with the 2022 compliance period.

22 Section 59 of the Regulations is replaced by the following:

Surplus credits

59 For the purposes of section 175 of the Act, the number of surplus credits, equivalent to the difference between the emissions limit and the quantity of GHGs emitted from the covered facility, that the Minister issues is based on what is reported in the annual report submitted for the compliance period if the emissions limit that was set out in the report was calculated in accordance with these Regulations, unless

  • (a) a material discrepancy, within the meaning of subsection 49(2), exists with respect to the total quantity of GHGs or the production from one of the specified industrial activities that is used in the calculation of the emissions limit for the compliance period; or
  • (b) the emissions limit or the quantity of GHGs emitted from the covered facility is determined by the Minister for the compliance period under section 53.

23 Section 70 of the Regulations is replaced by the following:

Surplus credits

70 (1) Subject to subsection (2), any surplus credit may be remitted to the Minister for the purposes of subsection 174(1) or paragraph 178(1)(a) of the Act if the credit was issued no more than five calendar years before the remittance.

Details — removal of province

(2) The surplus credit must have been issued in respect of a facility that is located in a province that was listed in Part 2 of Schedule 1 to the Act for at least one day during the compliance period for which the credit is being remitted.

24 (1) The portion of subsection 72(1) of the Regulations before paragraph (a) is replaced by the following:

Suspension — reasonable grounds

72 (1) For the purposes of subsection 180(1) of the Act, the Minister may suspend a surplus credit in an account if the Minister has reasonable grounds to believe that the credit

(2) Section 72 of the Regulations is amended by adding the following after subsection (1):

Suspension — removal of province

(1.1) For the purposes of subsection 180(1) of the Act, the Minister may suspend all surplus credits

  • (a) that were issued in respect of a covered facility that is located in a province that was listed in Part 2 of Schedule 1 to the Act but is no longer listed in that Part; and
  • (b) that are in an account in the tracking system that is linked to a facility that is located in a province that is no longer listed in Part 2 of Schedule 1 to the Act and ceased being a covered facility at the time when the name of the province in which it is located was removed from Part 2 of Schedule 1 to the Act.

(3) Subsection 72(3) of the Regulations is replaced by the following:

Response

(3) If a credit was suspended on any of the grounds listed in subsection (1), the holder of the account may, within 30 days after the day on which the Minister's notice under subsection (2) is issued, submit to the Minister their reasons why the credit should not be suspended.

Conditional removal of suspension

(4) The person responsible for a facility who holds an account that is linked to the facility in the tracking system in which there remain surplus credits that were suspended as a result of the name of a province being removed from Part 2 of Schedule 1 to the Act may make a request to the Minister to lift the suspension of those surplus credits if the surplus credits are to be provided as compensation for the facility's excess emissions under subsection 174(1) of the Act or paragraph 178(1)(a) of the Act, in respect of a compliance period during which the facility was a covered facility.

25 The portion of section 73 of the Regulations before paragraph (b) is replaced by the following:

Revocation

73 The Minister must, after the period set out in subsection 72(3), thoroughly review the reasons for the suspension that are set out in subsection 72(1) and notify the holder of the account that

  • (a) if the Minister determines that the reasons for the suspension are well-founded, the surplus credit is revoked; or

26 Paragraph 75(2)(a) of the Regulations is replaced by the following:

  • (a) in the case of surplus credits, have been issued within five calendar years before the deadline indicated in the notice provided under subsection (1) and have been issued in respect of a covered facility located in a province that was listed in Part 2 of Schedule 1 to the Act for at least one day during the compliance period for which the credit is being remitted; and

27 Subparagraph 78(4)(d)(i) of the Regulations is replaced by the following:

  • (i) is accredited as a verification body to the ISO Standard 14065 by the Standards Council of Canada, the ANSI National Accreditation Board or any other accreditation organization that is a member of the International Accreditation Forum, and

28 Subsection 93(5) of the Regulations is replaced by the following:

January 1, 2022
(5) Section 56 comes into force on January 1, 2022.

29 The portion of item 30 of Schedule 1 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Output-based standard (CO2e tonnes / unit of measurement)

30 0.0995

30 Schedule 3 of the Regulations is amended by adding the following after the heading “Quantification Requirements”:

Interpretation – Emission Factors

For the purposes of this Schedule, if the method for calculating GHGs set out in column 3 of Parts 1 and 2, Division 1 of Parts 3 to 5, Part 6, Division 1 of Parts 7 and 8, Parts 9 to 17, Division 1 of Part 18, Parts 19 to 24, Table 1 of Part 25, Parts 26 to 35 and Division 1 of Parts 36 to 38 is the method referred to in the GHGRP 2.A and 2.B, the emission factor tables to be used in calculating the GHGs are those set out in the 2020 GHGRP.

31 The portion of item 1 of Part 1 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
32 The portion of item 4 of Part 1 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

4 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
33 The portion of item 1 of the table to Part 2 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
34 The portion of item 6 of Part 2 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

6 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E

35 The heading of column 5 of Division 1 of Part 3 of Schedule 3 to the French version of the Regulations is replaced by “Méthode d'estimation des données manquantes”.

36 The portion of item 1 of Division 1 of Part 3 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
37 The portion of items 1 to 6 of Division 1 of Part 3 of Schedule 3 of the French version of the Regulations in column 5 is replaced by the following:
Article Colonne 5
Méthode d'estimation des données manquantes
1 Méthode d'ECCC, section 2.D
2 a) Méthode de la WCI, disposition WCI.205
b) Méthode de la WCI, disposition WCI.205
c) Méthode de la WCI, disposition WCI.205
3 a) Méthode de la WCI, disposition WCI.135
b) Méthode de la WCI, disposition WCI.205
c) Méthode de la WCI, disposition WCI.205
d) Méthode de la WCI, disposition WCI.205
4 Méthode de la WCI, disposition WCI.205
5 Méthode de la WCI, disposition WCI.205
6 a) Méthode de la WCI, disposition WCI.205
b) Méthode de la WCI, disposition WCI.205
38 The portion of item 7 of Division 1 of Part 3 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

7 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E

39 The heading of column 5 of Division 1 of Part 4 of Schedule 3 to the French version of the Regulations is replaced by “Méthode d'estimation des données manquantes”.

40 The portion of item 1 of Division 1 of Part 4 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
41 The portion of Items 1 to 3 in Division 1 of Part 4 of Schedule 3 to the French version of the Regulations in column 5 is replaced by the following:
Article

Colonne 5

Méthode d'estimation des données manquantes

1 Méthode d'ECCC, section 2.D
2 Méthode de la WCI, disposition WCI.365
3 Méthode de la WCI, disposition WCI.365
42 The portion of item 4 of Division 1 of Part 4 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

4 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
43 The portion of item 1 of Division 1 of Part 5 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
44 The portion of item 1 of Part 6 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
45 The portion of item 5 of Part 6 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

5 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
46 The portion of item 1 of Division 1 of Part 7 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
47 The portion of item 3 of Division 1 of Part 7 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

3 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
48 The portion of item 1 of Division 1 of Part 8 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
49 The portion of item 3 of Division 1 of Part 8 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

3 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
50 The portion of item 1 of Part 9 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
51 The portion of item 3 of Part 9 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

3 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
52 The portion of item 1 of Part 10 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
53 The portion of item 2 of Part 10 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

2 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
54 The portion of item 1 of Part 11 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
55 The portion of item 3 of Part 11 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

3 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
56 The portion of item 1 of Part 12 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
57 The portion of item 3 of Part 12 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

3 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
58 The portion of item 1 of Part 13 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
59 The portion of item 2 of Part 13 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

2 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
60 The portion of item 1 of Part 14 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
61 The portion of item 6 of to Part 14 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

6 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
62 The portion of item 1 of Part 15 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
63 The portion of item 6 of Part 15 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

6 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
64 The portion of item 1 of Part 16 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
65 The portion of item 2 of Part 16 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

2 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
66 The portion of item 1 of Part 17 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
67 The portion of item 8 of Part 17 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

8 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
68 The portion of item 1 of Division 1 of Part 18 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
69 The portion of item 3 of Division 1 of Part 18 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

3 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E

70 (1) The description of A in section 1 of Division 2 of Part 18 of Schedule 3 to the French version of the Regulations is replaced by the following:

A représente la capacité de chaque cuve « i » utilisée pour mélanger les ingrédients ensemble à cette étape, exprimée en litres;

(2) The description of “i” in section 1 of Division 2 of Part 18 of Schedule 3 to the English version of the Regulations is replaced by the following:

i is the ith tank where “i” goes from 1 to n where n is the total number of tanks used to combine ingredients for that step.

71 The portion of item 1 of Part 19 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
72 The portion of item 3 of Part 19 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

3 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
73 The portion of item 1 of Part 20 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
74 The portion of item 5 of Part 20 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

5 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
75 The portion of item 1 of Part 21 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
76 The portion of item 3 of Part 21 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

3 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
77 The portion of item 1 of Part 22 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
78 The portion of item 2 of Part 22 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

2 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
79 The portion of item 1 of Part 23 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
80 The portion of item 3 of Part 23 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

3 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
81 The portion of item 1 of Part 24 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
82 The portion of item 2 of Part 24 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

2 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
83 The portion of item 1 of table 1 of Part 25 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
84 The portion of item 3 of table 1 of Part 25 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

3 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
85 The portion of item 1 of Part 26 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
86 The portion of item 2 of Part 26 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

2 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
87 The portion of item 1 of Part 27 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
88 The portion of item 2 of Part 27 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

2 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
89 The portion of item 1 of Part 28 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
90 The portion of item 2 of Part 28 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

2 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
91 The portion of item 1 of Part 29 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
92 The portion of item 3 of Part 29 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

3 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
93 The portion of item 1 of Part 30 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
94 The portion of item 3 of Part 30 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

3 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
95 The portion of item 1 of Part 31 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
96 The portion of item 3 of Part 31 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

3 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
97 The portion of item 1 of Part 32 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
98 The portion of item 3 of Part 32 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

3 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
99 The portion of item 1 of Part 33 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
100 The portion of item 3 of Part 33 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

3 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
101 The portion of item 1 of Part 34 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item Column 3

Method for Calculating GHGs
1 GHGRP 2.A and 2.B
102 The portion of item 2 of Part 34 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

2 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
103 The portion of item 1 of Part 35 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
104 The portion of item 2 of Part 35 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

2 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
105 (1) The portion of paragraphs 1(a) and (b) of Division 1 of Part 36 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 (a) GHGRP 2.A and 2.B, except for biomass fuels, other than those set out in Tables 2-3 and 2-11 of the GHGRP, use the emission factors provided in Tables 20-2 of WCI Method WCI.20(a)
(b) For fossil fuels, GHGRP 2.A and 2.B and for pulping liquor, WCI Method WCI.213(c)(a)
(2) The portion of paragraph 1(d) of Division 1 of Part 36 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 (d) GHGRP 2.B, except use the default emission factors for lime kilns set out in Table 210-1 of WCI Method WCI.213(a)
106 The portion of item 4 of Division 1 of Part 36 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

4 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E
107 The portion of item 1 of Division 1 of Part 37 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

1 GHGRP 2.A and 2.B
108 The portion of item 3 of Division 1 of Part 37 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

3 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E

109 Subitem 1(2) of Division 1 of Part 38 of Schedule 3 to the Regulations is repealed.

110 The portion of item 4 of Division 1 of Part 38 of Schedule 3 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Method for Calculating GHGs

Column 4

Sampling, Analysis and Measurement Requirements

Column 5

Method for Estimating Missing Analytical Data

4 2020 GHGRP 2.A.1.a, 2.A.2.e and 2.B 2020 GHGRP 2.D 2020 GHGRP 2.E

111 Subparagraph 3(h.1)(i) of Schedule 5 to the Regulations is replaced by the following:

  • (i) for each unit whose electricity generation capacity from gaseous fuels was increased by 50 MW or more and that is designed to operate at a thermal energy to electricity ratio of less than 0.9, separately, the gross amount of electricity generated during the compliance period by each unit that is attributed to the capacity added to the unit and the gross amount of electricity generated that is attributed to capacity of the unit before the additional capacity was added, and

Environmental Violations Administrative Monetary Penalties Regulations

112 The portion of item 17 of Division 1 of Part 7 of Schedule 1 to the Environmental Violations Administrative Monetary Penalties Regulationsfootnote 2 in column 1 is replaced by the following:
Item

Column 1

Provision

17 199(2)

113 Item 18 of Division 1 of Part 7 to Schedule 1 to the Regulations is repealed.

114 The portion of item 1 of Division 2 of Part 7 of Schedule 1 to the Regulations in column 1 is replaced by the following:
Item

Column 1

Provision

1 7.1
115 Division 2 of Part 7 of the Schedule 1 to the Regulations is amended by adding the following in numerical order:
Item

Column 1

Provision

Column 2

Violation Type

10.1 16(7.1)(a) E
11.1 16(9)(a) E
11.2 16(10)(a) E
13.1 20(5) E

116 Item 19 of Division 2 of Part 7 of Schedule 1 to the Regulations is repealed.

117 Division 2 of Part 7 of Schedule 1 to the Regulations is amended by adding the following in numerical order:
Item

Column 1

Provision

Column 2

Violation Type

20.1 39 E

118 Item 24 of Division 2 of Part 7 of Schedule 1 to the Regulations is repealed.

119 Division 2 or Part 7 of Schedule 1 to the Regulations is amended by adding the following in numerical order:
Item

Column 1

Provision

Column 2

Violation Type

24.1 42 E
24.2 44 E
26.1 45(3) D
26.2 46 D
32.1 50(3) E
120 The portion of items 40 to 42 of Division 2 of Part 7 of Schedule 1 to the Regulations in column 2 are replaced by the following:
Item

Column 2

Violation Type

40 D
41 D
42 D

121 Item 51 of Division 2 of Part 7 of Schedule 1 to the Regulations is repealed.

Coming into Force

122 (1) Subject to subsections (2) and (3), these Regulations come into force on January 1, 2022 and apply with respect to the 2022 compliance period and subsequent compliance periods.

(2) Sections 3, 4 and 6 are deemed to have come into force on January 1, 2021.

(3) Sections 1, 9 to 11, 13, 17, 29 to 34, 36, 38, 40, 42 to 69 and 71 to 110 are deemed to have come into force on January 1, 2021 and apply from that date with respect to the 2021 compliance period and subsequent compliance periods.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

The Greenhouse Gas Pollution Pricing Act (GGPPA or the Act) received royal assent on June 21, 2018. The GGPPA provides the legal framework and enabling authorities for the federal carbon pollution pricing system in Canada. This system consists of two parts: a regulatory charge on fossil fuels (the fuel charge), and an output-based pricing system (OBPS) for industrial facilities that is enabled by the Output-Based Pricing System Regulations (OBPSR or the Regulations). The federal system acts as a backstop in any jurisdiction that requests it or does not implement a carbon pricing system that meets minimum national stringency standards (the federal benchmark).

The objective of the Regulations is to ensure there is a price incentive for emissions-intensive and trade-exposed facilities to reduce greenhouse gas (GHG) emissions per unit of output, while mitigating risks to domestic competitiveness and of carbon leakage to other jurisdictions due to carbon pricing. The Regulations define the facilities to which the federal OBPS applies (“covered facilities”) and specify output-based or emissions per unit of output (emissions intensity) standards. Covered facilities generally do not pay the fuel charge on the fuel they use at their facilities; instead, they are required to provide compensation on an annual basis for any GHG emissions exceeding their respective emissions limit. A covered facility's emissions limit, which is measured in tonnes of carbon dioxide equivalent (CO2e), is determined by multiplying the facility's production by the applicable output-based standard. A covered facility with GHG emissions below its limit receives surplus credits issued by the Minister of the Environment (the Minister) for the difference between its GHG emissions and its limit. Surplus credits can either be sold or used to meet a future compliance obligation.

The OBPSR were published in the Canada Gazette, Part II, on July 10, 2019. Through the administration of the Regulations, the Department of the Environment (the Department) has since identified the need to clarify and strengthen existing regulatory requirements to address the following issues:

  • (1) Provinces and territories may implement a carbon pollution pricing system that makes sense for their circumstances, either an explicit price-based system or a cap-and-trade system, as long as the system meets the federal benchmark, which establishes minimum national stringency standards. This flexibility makes it possible for a province or territory to transition from the federal backstop system, in whole or in part, by establishing its own system.footnote 3 Currently, the Regulations do not prevent surplus credits issued to facilities in a jurisdiction where the federal OBPS no longer applies from being used as compensation for excess emissions. However, in a situation where the OBPS no longer applies in a province or territory because it has implemented its own carbon pricing system for industry that aligns with the federal benchmark, there could be a sudden decrease in the demand relative to the supply of surplus credits. This could cause the price of surplus credits to fall and thereby diminish the incentive to reduce GHG emissions in the OBPS.
  • (2) The OBPSR contain a rounding rule for the quantification of production. Changes are required to improve accuracy in the calculation of the emissions limits of covered facilities. Changes are also required to update emission factors used in the quantification of GHG emissions from fuel combustion in order to improve calculation accuracy. The readability of the current quantification method for on-site transportation emissions also needs to be clarified.
  • (3) The output-based standard specified in Schedule 1 to the Regulations for the industrial processing of potatoes for human or animal consumption needs to be modified to account for revisions to the historical data used to develop this standard.
  • (4) In addition, several administrative changes are required to improve the clarity of the Regulations and help ensure that compliance with the OBPSR is consistent with the Department's policy intent.

Background

The Government of Canada has committed to taking action on climate change and is working in partnership with the international community. In December 2015, the international community, including Canada, adopted the Paris Agreement, an accord intended to reduce GHG emissions to limit the rise in global average temperature to less than two degrees Celsius (2 °C) above pre-industrial levels and to aim to limit the temperature increase to 1.5 °C. As part of its commitments made under the Paris Agreement, Canada pledged to reduce national GHG emissions by 30% below 2005 levels by 2030.

On July 12, 2021, the Minister formally submitted Canada's enhanced nationally determined contribution (NDC) to the United Nations, committing Canada to reduce national GHG emissions by 40% to 45% below 2005 levels by 2030. The Government of Canada has also committed to achieving net-zero GHG emissions by 2050 in its strengthened climate plan called A Healthy Environment and a Healthy Economy. To meet these commitments, the federal government is implementing a series of measures, including continuing to put a price on carbon pollution.

Federal carbon pollution pricing benchmark

The Pan-Canadian Approach to Pricing Carbon Pollution was published in 2016 and sets out minimum national stringency standards for provincial and territorial carbon pricing systems known as the federal benchmark.footnote 4 The carbon pricing systems of all provincial and territorial governments in Canada were first assessed against the federal benchmark in the fall of 2018 and continue to be assessed annually. In A Healthy Environment and a Healthy Economy, a strengthened federal climate plan published in December 2020, the Government of Canada indicated that it would review the federal benchmark with a view towards strengthening it and further aligning carbon pricing systems across Canada for the post-2022 period. On July 12, 2021, after engagement with provincial and territorial governments and Indigenous organizations in the winter of 2021, the Government of Canada confirmed that the minimum price on carbon pollution will increase by $15 per tonne each year starting in 2023 through to 2030 and that it has updated the federal benchmark for the 2023–2030 period to make sure it is fair, consistent and effective.footnote 5

Federal carbon pricing backstop system

Part 1 of the GGPPA establishes the fuel charge, which is generally paid by fuel producers or distributors and generally applies to fossil fuels produced, delivered or used in a backstop jurisdiction, brought into a backstop jurisdiction from another place in Canada, or imported into Canada at a location in a backstop jurisdiction. The fuel charge is administered by the Canada Revenue Agency (CRA). Part 2 of the GGPPA provides the legal framework and authorities to establish the federal OBPS, a regulatory trading system for industrial facilities that is administered by the Department. Facilities subject to the OBPS generally do not pay the fuel charge on the fuel they use at their facilities; instead, they pay the excess emissions charge on their GHG emissions that exceed their respective facility emissions limit. When the GHG emissions of a covered facility are under its emissions limit, the facility is issued surplus credits by the Minister that it can either sell or use to meet a future compliance obligation.

The GGPPA provides the Governor in Council with the authority to determine where the federal carbon pricing system applies by amending Schedule 1 to the Act to add or delete the names of provinces and territories. The federal OBPS applies in the jurisdictions listed in Part 2 of Schedule 1 to the GGPPA.

The OBPSR took effect on January 1, 2019, in Ontario, New Brunswick, Manitoba and Prince Edward Island, and partially in Saskatchewan. In Yukon and Nunavut, the OBPSR took effect on July 1, 2019. The OBPS covers facilities carrying out certain industrial activities in backstop jurisdictions that emit 50 kilotonnes (kt) or more of CO2e per year. In addition, facilities located in backstop jurisdictions that emit 10 kt or more of CO2e per year, and that either undertake an industrial activity identified by the Regulations or operate in an industrial sector considered to be at significant risk of decreased competitiveness and carbon leakage as a result of carbon pricing, may apply to become voluntary participants in the OBPS.

Covered facilities have a number of options regarding how they choose to provide compensation for excess emissions. First, they may make excess emissions charge payments to the Receiver General for Canada.footnote 6 Second, they may use compliance units, each representing one tonne of CO2e, which include (i) surplus credits issued by the Minister to covered facilities or that have been acquired through trade from other covered facilities; (ii) eligible provincial or territorial offset credits formally recognized by the Minister under the Regulations as compliance units; and (iii) offset credits issued by the Minister.footnote 7 Covered facilities may also use a combination of excess emissions charge payments and compliance units to provide compensation.

Objective

The objective of the Regulations Amending the Output-Based Pricing System Regulations and the Environmental Violations Administrative Monetary Penalties Regulations (the Amendments) is to help ensure that the incentive to reduce GHG emissions in the federal OBPS is maintained by adding rules respecting transitional matters related to the deletion of the name of a province or territory from Part 2 of Schedule 1 to the GGPPA and by providing rules related to facilities that cease to be covered facilities. The Amendments also aim to increase the accuracy of the values of output, GHG emissions and emissions limits calculated by covered facilities by adjusting quantification rules in the Regulations. Furthermore, the Department intends to clarify various provisions of the regulatory text in order to facilitate its administration of the OBPSR and help ensure that compliance with the Regulations is consistent with its policy intent.

Description

The Amendments apply to covered facilities and modify the OBPSR as described below.

Rules relating to surplus credits and payments

The Amendments limit the use of surplus credits issued by the Minister to a covered facility located in a province or territory that is removed from Part 2 of Schedule 1 to the GGPPA. These surplus credits may not be used to meet a compensation obligation under the OBPSR for any compliance period in which this province or territory is not listed in Part 2 of Schedule 1. In addition, the Amendments provide that the Minister may suspend surplus credits in the OBPS accounts of facilities to which credits were issued if the province or territory in which the facilities are located is removed from Part 2 of Schedule 1. In order to ensure that covered facilities have sufficient time to use surplus credits for the last compliance period in which a province or territory was listed in Part 2 of Schedule 1, surplus credits will generally only be considered for suspension once the increased-rate compensation deadline for that compliance period has passed. Should such a suspension of surplus credits occur, it could be lifted by the Minister when those surplus credits are to be used by the facility to meet a compensation obligation for a compliance period in which the province or territory in which the facility is located was listed in Part 2 of Schedule 1, provided that the surplus credits are still eligible for use.footnote 8

The OBPSR currently allow the Minister to establish the GHG emissions or the emissions limit for a covered facility when there is a material discrepancy with respect to the quantification of production or GHG emissions set out in the annual report or the corrected report of the facility for a compliance period, or when a verification body was not able to make that determination or establish whether the facility's annual report or corrected report was prepared in accordance with the Regulations.footnote 9 The Amendments clarify that, when the Minister has established the GHG emissions or the emissions limit for a facility, surplus credits will not be issued. They also clarify that, if the emissions limit set out in a facility's annual report submitted for a compliance period has been calculated in accordance with the Regulations, then the number of surplus credits that the Minister issues is based on what is reported in that annual report.

The OBPSR provide that, starting on February 16, 2023, a minimum of 25% of the compensation for excess emissions required under the Act be provided by means of an excess emissions charge payment. The Amendments clarify that the requirement to pay the excess emissions charge to provide compensation for a minimum of 25% of the excess emissions for each compliance period applies to any compensation owed relating to the 2022 compliance period and subsequent compliance periods.

Rules relating to quantification and verification

The OBPSR require that the production values calculated by covered facilities be rounded to three significant figures and that the GHG emission values calculated by these facilities be rounded to the nearest tonne. The Amendments repeal these provisions to improve precision in a covered facility's assessment of its GHG emissions, as well as in a facility's calculation of its emissions limit, determined by multiplying its production by the applicable output-based standard. The Amendments instead only require that the difference between a covered facility's GHG emissions during a compliance period and its emissions limit for that period be rounded to the nearest whole number.

Emission factors used in the quantification of GHG emissions from fuel combustion are updated to incorporate those of the 2020 version of Canada's Greenhouse Gas Quantification Requirements under the Greenhouse Gas Reporting Program (GHGRP).footnote 10 These changes increase the precision of GHG quantification, and comparisons of GHG emissions and emissions limits, under the Regulations. The Amendments also require that on-site transportation emissions be quantified in accordance with the 2020 GHGRP quantification requirements. This change is anticipated to improve the understanding of the quantification methods for on-site transportation emissions and help facilities comply with quantification requirements, as the approach for quantifying these emissions has been clarified in the 2020 GHGRP requirements.

Furthermore, to improve the precision of a covered facility's assessment of its GHG emissions, the OBPSR are modified to explain when carbon dioxide (CO2) emissions that have been captured and permanently stored may be deducted from a facility's total GHG emissions. The Amendments clarify that CO2 emissions that have been captured and permanently stored in a project meeting the storage requirements in section 35 of the Regulations must first be included in the quantification of the facility's total emissions. These emissions are then allowed to be deducted from the facility's total emissions, thereby ensuring that GHGs removed from the atmosphere are not counted more than once.

Lastly, the OBPSR currently specify that a verification body cannot conduct the verification of an annual report if it has conducted six consecutive verifications of annual reports prepared under the Regulations with respect to the same covered facility, unless three years have elapsed since the last of those reports was verified. Another provision is added to limit the number of verifications of annual reports by a single verification body to six annual reports prepared under the Regulations with respect to the same covered facility within any period of nine calendar years.

Registration of and ceasing to be a covered facility

The Amendments provide clarification with respect to the beginning of the first compliance period for a facility that becomes a covered facility in a compliance period that has already begun. For a covered facility located in a province or territory where the federal fuel charge applies, the first compliance period for the facility begins on the effective date of registration as an emitter with the CRA under Part 1 of the Act (Fuel Charge). If the facility is located in a province or territory where a provincial or territorial fuel charge applies in place of the federal fuel charge, the first compliance period begins on the date specified in the covered facility certificate issued under Part 2 of the Act (Industrial Greenhouse Gas Emissions).

The Amendments provide clarity with respect to the transitional measures related to circumstances where a facility ceases to be a covered facility and the obligations that remain for the person responsible for that facility. In particular, a clarification to the regulatory text specifies that the person responsible for a facility must meet the requirements of the OBPSR, such as submitting a verified annual report and providing compensation for excess emissions, for any compliance period (whole or partial) during which the facility was subject to the Regulations.

Other modifications

The output-based standard set out in item 30 of Schedule 1 to the OBPSR for the industrial processing of potatoes for human or animal consumption is amended to account for revised historical data.

The Amendments clarify that the output-based standard for solid fuel only applies to a boiler unit of an electricity generation facility, even if the boiler unit generates electricity using liquid or gaseous fuel,

  • provided that the unit was registered under the Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations in 2018 or is still registered under these Regulations; and
  • provided that the unit used solid fuel to generate electricity in 2018.

Minor modifications are also made to the OBPSR to clarify and improve the regulatory text, including

  • changing the name of the American National Standards Institute to “ANSI National Accreditation Board”;
  • correcting errors in a formula applicable to industrial activities for which an output-based standard must be calculated;
  • making a clarification to subsection 6(1) of the Regulations, which specifies when the Minister may cancel the designation of a covered facility; and
  • ensuring that the English and French versions of the regulatory text align.

The Amendments also make related modifications to the Environmental Violations Administrative Monetary Penalties Regulations. These changes are being made to reflect the changes introduced to the OBPSR by the Amendments and to correct errors made when first designating violations under the Regulations in 2019. The changes will allow enforcement officers to continue to issue administrative monetary penalties for certain violations under the Act and the Regulations.

Regulatory development

Consultation

Most of the Amendments will facilitate the implementation and the administration of the OBPSR. Some of them are the result of issues raised by stakeholders, such as the inaccuracies created by the rounding requirements for production. Moreover, following the publication of the final Regulations in 2019, the Department received a request from a covered facility in the potato processing sector to revise the output-based standard applicable to this sector to account for revised historical data, and stakeholders have asked for better harmonization of quantification requirements between the OBPSR and the GHGRP.

On December 23, 2020, a notice was published by the Minister on the Government of Canada's web page announcing the intent to develop the Amendments and make an order under section 189 of the Act to delete the names of certain provinces from Part 2 of Schedule 1 to the GGPPA, in order to improve the implementation of the Regulations and act upon the Government of Canada's stated intention of taking the necessary steps to transition from the federal OBPS to the carbon pricing systems for industry in New Brunswick and Ontario.footnote 11 Pursuant to section 194 of the GGPPA, the Amendments and the Order modifying Part 2 of Schedule 1 to the Act may have effect earlier than the day on which they are made, if they so provide, and they give effect to measures referred to in the notice of intent.

On February 12, 2021, the Department launched a formal review of the OBPSR in response to a commitment made when the Regulations were published in the Canada Gazette, Part II.footnote 12 The goal of this review is to identify any essential changes to the Regulations that are necessary

  • in order for the federal OBPS to continue to contribute to Canada's GHG emissions reduction goals, while minimizing risks to domestic competitiveness and of carbon leakage to other jurisdictions resulting from carbon pricing; and
  • in order for the federal OBPS to effectively function as a carbon pricing backstop system for industry in any jurisdiction in Canada, if applicable.

On March 11, 2021, the Department hosted consultation sessions (webinars) in English and French. The goal of these sessions was to provide the regulated community with an overview of the proposed scope of the formal review of the OBPSR, and an overview of the proposed Amendments. The Department took all comments received from interested parties into account in finalizing the Amendments.

Consultation following the publication of the proposed Amendments in the Canada Gazette, Part I

The proposed Amendments were published in the Canada Gazette, Part I, on June 5, 2021, followed by a 30-day comment period ending on July 5, 2021. At the same time, the Department published a link to the proposed Amendments on the Government of Canada's output-based pricing system web page to make them broadly available to interested parties. The Department also sent an email to a wide range of interested parties — including regulated facilities, representatives of the provincial and territorial governments, industry associations and their members, and non-governmental organizations (NGOs) — to provide an overview of the proposed Amendments and distribute information on the formal consultation process.

On June 17, 2021, the Department hosted general consultation sessions (webinars) in English and French. The goal of these sessions was to provide an overview of the regulatory proposal and answer questions to help inform possible written submissions. Participants offered their general support for most of the proposed Amendments during the webinar. The most notable subject of concern was with the proposal to suspend and limit the use of surplus credits issued to facilities in a province or territory where the OBPS no longer applies. Departmental officials closed the sessions by responding to questions from participants and inviting them to submit their written comments.

The Department received a total of 24 written submissions from a range of stakeholders during the 30-day comment period. Some stakeholders requested changes to the proposed regulatory text to improve the clarity of definitions and other administrative provisions. Some stakeholders also requested clarifications regarding the regulatory text and its applicability. The Department has provided detailed explanations to stakeholders and, where appropriate, has made modifications to the regulatory text. The following paragraphs summarize the significant issues raised by interested parties and the Department's consideration and analysis of these issues leading to the finalization of the Amendments.

Rules relating to surplus credits and payments

Of the 24 submissions received, 20 of the commenters were not in favour of the proposal to suspend and limit the use of surplus credits issued to facilities in a province or territory where the OBPS no longer applies. They indicated that it creates uncertainty and may reduce the incentive for investment in projects to reduce GHG emissions because of their inability to sell surplus credits at their maximum value, which is expected to be the monetary amount they could sell credits for during the last year of credit eligibility, the fifth year after credits are issued. Concerns were raised over the discretionary power to suspend surplus credits, in particular that the Minister may use this power to suspend surplus credits before they could be used for compensation in a compliance period in which they are eligible. Some stakeholders asked for fungibility between provincial and federal systems such that surplus credits could be transferred from one system to another.

No changes have been made to the regulatory text. Surplus credits will generally only be considered for suspension following the increased-rate compensation deadline for the last compliance period in which a province or territory, in which the facilities to which credits were issued are located, was listed in Part 2 of Schedule 1 to the GGPPA. This allows covered facilities sufficient time to use these surplus credits. The Amendments are required to help ensure the federal OBPS maintains sufficient stringency through a balance of supply of and demand for credits in the emissions trading system to maintain a clear price signal that is aligned with the minimum carbon price. Other jurisdictions have taken measures to maintain the integrity of emissions trading systems when the scope of their carbon pricing systems has changed substantially. Without the Amendments, there could be a significant decrease in the price of surplus credits that could arise from a sudden decrease in the demand relative to the supply of credits as the scope of federal OBPS changes over time, which could negatively impact the GHG emissions reductions realized within the system. Lastly, any potential loss of value for credit holders must also be considered with the risk that the price of surplus credits could fall when there is an excess supply of banked credits.

The Government of Canada's approach to pricing carbon pollution recognizes the flexibility of provinces and territories to implement the type of carbon pricing system that makes sense for their circumstances as long as they align with the minimum national stringency standards, as set out in the federal benchmark. This flexibility includes the ability for a province or territory to consider what credits generated in other carbon pricing systems may be eligible for compensation purposes within the respective provincial or territorial carbon pricing system while ensuring that this system continues to meet the federal benchmark.

Concerning the change to the provision of the OBPSR specifying that a minimum of 25% of the compensation for excess emissions that is required under the Act must be provided by means of an excess emissions charge payment, it is only a clarification of the Department's original policy intent. However, some commenters expressed disagreement with the original intent of the requirement and asked for the ability to use unlimited amounts of surplus credits and other compliance units as compensation. The regulatory text has not been revised. The Department will consider the comments received as part of the work underway for the formal review of the OBPSR launched in February 2021.

Rules relating to quantification and verification

Stakeholders generally expressed agreement with the changes made to quantification methodologies in the Regulations to align with select methods of the 2020 GHGRP quantification requirements. Many commenters proposed broader harmonization through incorporation by reference of the most recent version of the GHGRP instead of aligning with select methods from the 2020 GHGRP requirements. The regulatory text has not changed in response to these comments. The Department is currently considering options for broader harmonization in this regard as part of the work underway for the formal review of the OBPSR.

Some stakeholders objected to the proposal to limit the number of verifications of annual reports by a single verification body to six annual reports prepared under the Regulations with respect to the same covered facility within any period of nine calendar years, citing challenges and burdens associated with finding new accredited verification bodies. The regulatory text has not changed in response to these comments. The Department anticipates that this requirement will help ensure the impartiality of independent verification bodies, thereby helping to avoid real and potential conflicts of interest.

Registration of and ceasing to be a covered facility

Stakeholders requested that the proposed obligation to inform the Minister 30 days in advance of a change in the person responsible for a covered facility be removed from the Amendments. Certain commenters indicated that these types of corporate-level changes are not always known in advance by the staff who in practice are responsible for completing notices of such changes and submitting them to departmental officials. Section 48 of the OBPSR already includes a requirement to inform the Minister within 30 days of a change in information previously provided to the Department, which includes a change in the person responsible for a facility. Up-to-date information about the person responsible for a facility is essential for the administration of the federal OBPS, including the administration of accounts in the OBPS credit and tracking system. In response to stakeholder feedback, this additional obligation to notify the Minister has been withdrawn. The existing requirement under section 48 of the OBPSR will remain unchanged.

Other modifications

The Department received a few comments in favour and one comment not in favour of the proposed clarification regarding the application of the output-based standard for the generation of electricity using solid fuel to boiler units. The criteria set out under subsection 41(2) of the OBPSR limit the application of this provision to units registered under the Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations that burned solid fuel in 2018. A unit other than a boiler unit would not meet these criteria. Given that this change serves to clarify the original policy intent of the requirement, the regulatory text has not been revised to address this comment. The treatment of electricity generation under the OBPSR will be considered as part of a parallel process exploring the role of a clean electricity performance standard in the context of the full set of measures in place and proposed in the Government of Canada's strengthened climate plan, A Healthy Environment and a Healthy Economy.

Modern treaty obligations and Indigenous engagement and consultation

The Amendments do not have any modern treaty implications. They respect the Government of Canada's obligations in relation to rights protected by section 35 of the Constitution Act, 1982 and modern treaties, and international human rights obligations. The federal government continues to work with Indigenous organizations to ensure that the federal approach to pricing carbon pollution considers the unique circumstances and priorities of Indigenous peoples.

Instrument choice

The Department considers the Amendments to be necessary since the rules in the OBPSR concerning surplus credits need to be strengthened. Currently, there is a risk that the incentive to reduce GHG emissions in the federal OBPS could diminish considerably, in the event that surplus credits issued to facilities in a jurisdiction where the OBPS no longer applies can be used for compensation for compliance periods during which this jurisdiction is not subject to the OBPS. The Department also considers the Amendments to be necessary given that the calculations of the emissions limits of covered facilities could be more precise by adjusting the rules in the Regulations concerning the quantification of production and GHG emissions. Finally, the clarifications to various provisions of the regulatory text, by means of the Amendments, will facilitate the Department's administration of the OBPSR and help ensure that compliance with the OBPSR is consistent with the Department's policy intent.

Regulatory analysis

Benefits and costs

This analysis assesses the impacts (benefits and costs) of a regulatory scenario in which the Governor in Council makes the Amendments relative to a baseline scenario in which this has not occurred. The Amendments introduce changes to rules in the OBPSR related to surplus credits, payments and quantification, and they clarify a number of provisions of the regulatory text. The magnitude of the impacts that are attributable to the Amendments is expected to be low; therefore, these impacts have been assessed qualitatively. Specifically, it is assumed that the Amendments have no impact on the projected GHG emission reductions associated with the Regulations.

Impacts related to surplus credit and payment rules

The Amendments serve to maintain the incentive to reduce GHG emissions in the federal OBPS by allowing the Minister to suspend surplus credits issued to facilities in a jurisdiction that is no longer in the OBPS and limiting the use of these credits. The addition of these rules to the Regulations will help prevent a significant decrease in the price of surplus credits that could arise from a sudden decrease in the demand relative to the supply of credits. These rules only limit the period of time during which certain surplus credits may be used. Covered facilities will be able to use surplus credits generated in a province or territory that is no longer in the OBPS to meet compensation obligations for the compliance periods in which that province or territory was listed in Part 2 of Schedule 1 to the GGPPA.

Although the Amendments establish these surplus credit rules, they cannot be implemented until an amendment is made to delete the name of a province or territory from Part 2 of Schedule 1 to the GGPPA. The impacts associated with the rules are attributable to a decision that the federal OBPS no longer applies in a province or territory because it has implemented its own carbon pricing system for industry that aligns with the federal benchmark. Therefore, these impacts will be considered in the Regulatory Impact Analysis Statement (RIAS) accompanying any order removing a province or territory from Part 2 of Schedule 1, which will be published in the Canada Gazette.

The OBPSR require that a minimum of 25% of the compensation for a covered facility's excess emissions must be provided by means of an excess emissions charge payment. This provision comes into force on February 16, 2023. The Amendments further clarify the Department's policy intent in regard to this provision, as stated in the RIAS that accompanied the Regulations when they were published in 2019.footnote 13 In particular, the Amendments clarify that a covered facility must pay the excess emissions charge to provide compensation for a minimum of 25% of its excess emissions beginning with the 2022 compliance period.

Impacts related to changes to quantification rules

The OBPSR currently mandate covered facilities to round production values to three significant figures. This provision may lead to unnecessary inaccuracies in the calculation of the emissions limits of covered facilities. The following example is provided for illustrative purposes:

  • Facility A undertakes an industrial activity and reports 67 500 tonnes of output using the current production rounding rule for a given compliance period, but it actually produced 67 460 tonnes of output. Assuming that the applicable output-based standard is 1.25 tonnes of CO2e per tonne of output, then the emissions limit of the facility is higher than it would have been, had it been based on the unrounded production value, by an amount of 50 tonnes of CO2e.footnote 14
  • On the other hand, Facility B undertakes the same industrial activity and reports 67 500 tonnes of output as well using the current production rounding rule for the same compliance period, but it actually produced 67 532 tonnes of output. Assuming again that the applicable output-based standard is 1.25 tonnes of CO2e per tonne of output, then the emissions limit of the facility is lower than it would have been, had it been based on the unrounded production value, by an amount of 40 tonnes of CO2e.footnote 15

The Amendments remove the requirement for covered facilities to round production values to three significant figures. This removal increases accuracy in the measurement of output values, which renders the calculation of the emissions limits of covered facilities under the OBPSR more precise and fairer. It is assumed the removal of the production rounding rule would not affect business decisions related to production or emissions intensity, so this change is not expected to lead to any GHG emission impacts. Nonetheless, it could lead to small distributional effects on the emissions limits of covered facilities within industrial sectors, with the limits of some facilities increasing slightly, and the limits of other facilities decreasing slightly, during a given compliance period. It is anticipated that these positive and negative changes in emissions limits will be minor and tend to offset each other in general.

The quantification requirements established by the Department's GHGRP that were published in 2017 are one of the main methods specified in the Regulations to calculate GHG emissions. Subsection 2(2) of the Regulations provides that a reference to any document incorporated by reference is incorporated as amended from time to time, with two exceptions: (1) the ISO Standard 14065 published by the International Organization for Standardization in 2013; and (2) the GHGRP. The incorporation of the 2017 GHGRP quantification requirements in the OBPSR is thus static in nature. Regulatory amendments are necessary to incorporate emission factors from the 2020 GHGRP requirements for the quantification of emissions from fuel combustion. In addition, the Amendments incorporate the 2020 GHGRP requirements for the quantification of on-site transportation emissions. These changes are not projected to lead to significant impacts on compliance obligations under the Regulations. Covered facilities are already required to report to the GHGRP. These changes represent a first step towards additional harmonization of the GHG quantification requirements of the Regulations with those of the GHGRP. The formal review of the OBPSR launched in February 2021 will explore further opportunities for harmonization in this regard.

Impacts related to other modifications

The Amendments modify the output-based standard for the industrial processing of potatoes for human or animal consumption to account for revisions to the historical data used to set the standard. The change results in an increase in the numerical value of the output-based standard. This modification, which is based on updated historical data, aligns the approach used in the development of the output-based standard for potato processing with those used in the development of all other output-based standards under the Regulations. Holding the GHG emissions and production of a covered facility in the potato processing sector constant, this revision will benefit the facility by increasing its emissions limit, which would either decrease its compensation obligation or increase the number of surplus credits to which it could be entitled. The increase in the emissions limits of facilities in the potato processing sector in backstop jurisdictions is not expected to affect the total reductions in GHG emissions that are incentivized by the OBPS.

The Amendments make clarifications to various provisions of the regulatory text. The details of these modifications are provided in the “Description” section. Overall, these clarifications improve the Department's administration of the Regulations and help ensure that compliance with the OBPSR is consistent with the Department's policy intent. They are not expected to result in any incremental impacts for covered facilities.

Small business lens

The federal OBPS has been designed to allow smaller facilities located in backstop jurisdictions to voluntarily participate in the system. A key component of this approach is that facilities choosing to voluntarily participate in the OBPS (“voluntary participants”) should have or, in the case of new, retrofitted or expanded facilities, expect to have annual emissions of 10 kt or more of CO2e.footnote 16

No facilities in backstop jurisdictions that must participate in the federal OBPS (“mandatory participants”) are considered small businesses; however, it is possible that some voluntary participants are small businesses. Voluntary participants are already required to report to the GHGRP. The incorporation of the 2020 GHGRP requirements related to emission factors for the quantification of emissions from fuel combustion and to the quantification of on-site transportation emissions is not anticipated to lead to significant impacts on the compliance obligations of smaller facilities subject to the Regulations.

The removal of the production rounding rule could lead to minor distributional impacts for all covered facilities, including voluntary participants, but it improves accuracy and fairness in the calculation of emissions limits under the OBPSR, as mentioned above. In terms of the revision to the output-based standard for potato processing, this decreases the stringency of the standard, which benefits any small business in the industrial potato processing sector participating in the federal OBPS.

One-for-one rule

When the Amendments were published in the Canada Gazette, Part I, it was reported that they would result in an incremental increase in administrative burden of approximately $320 in annualized average costs. This projected increase in administrative burden stemmed from a proposed new requirement — specifically, for persons anticipating they would no longer be the person responsible for a covered facility to inform the Minister in writing at least 30 days before the anticipated change — that has since been removed and is not part of the final version of the Amendments. Therefore, the one-for-one rule does not apply to the Amendments, as they will no longer result in an incremental change in administrative burden on business. Finally, since they modify the OBPSR, the Amendments lead to no net change in regulatory titles.

Regulatory cooperation and alignment

The federal government is committed to ensuring that the provinces and territories have the flexibility to design their own policies and programs, while ensuring that carbon pricing applies to a broad set of GHG emission sources across Canada with increasing stringency over time. The federal government's approach to pricing carbon pollution from large industrial emitters is comparable to other systems in Canada and internationally. Most systems in Canada and around the world are designed to put a price signal on pollution while minimizing competitiveness impacts for industries vulnerable to carbon leakage, either within the design of the system itself, or in how revenue generated by the system is recycled. The Amendments support implementation of the federal OBPS, which is a component of Canada's carbon pollution pricing approach.

Strategic environmental assessment

The OBPSR support the implementation of the Pan-Canadian Framework on Clean Growth and Climate Change (the Pan-Canadian Framework) and the Pan-Canadian Approach to Pricing Carbon Pollution. The objective of the Regulations is to retain a price on carbon pollution that creates an incentive for emissions-intensive and trade-exposed facilities to reduce emissions per unit of output, while mitigating risks to domestic competitiveness and of carbon leakage to other jurisdictions due to carbon pricing. The Amendments do not change the environmental objective of the OBPSR, and thus a preliminary scan concluded that a strategic environmental assessment is not required, in accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals.

Gender-based analysis plus

No gender-based analysis plus (GBA+) impacts have been identified in association with the Amendments.

Implementation, compliance and enforcement, and service standards

Implementation

The Amendments come into force on January 1, 2022, with several exceptions. The following changes to the Regulations, which are referred to in the Minister's notice of intent published on December 23, 2020,footnote 11 and explained in the “Description” section, are deemed to have taken effect on January 1, 2021:

  • the repeal of the rounding requirements for production and GHG emissions calculated by covered facilities;
  • the incorporation of the emission factors for fuel combustion and the method to quantify on-site transportation emissions from the 2020 GHGRP requirements;
  • the clarifications of the obligations of the person responsible for a facility that ceases to be covered by the Regulations;
  • the revision to the value of the output-based standard for the industrial processing of potatoes for human or animal consumption; and
  • the corrections to the formula applicable to industrial activities for which an output-based standard must be calculated.

In determining if a change to the Regulations should come into force retroactively, the Department considered (i) whether the change is necessary prior to the transition of a province or territory from the federal OBPS to a provincial or territorial carbon pricing system for industry; and (ii) whether the change is projected to result in a considerable improvement in the implementation of the OBPSR or a reduction in regulatory costs for covered facilities.

Compliance and enforcement

Departmental officials will undertake actions to implement and enforce the Amendments, as necessary, in accordance with the Department's compliance and enforcement policies.footnote 17 Enforcement officers will apply the principles found in the compliance and enforcement policies when verifying compliance. These policies set out the range of possible enforcement responses to alleged violations. If an enforcement officer discovers an alleged violation following an inspection or investigation, the officer will choose the appropriate enforcement action based on the policies.

Contacts

Katherine Teeple
Director
Industrial Greenhouse Gas Emissions Management Division
Carbon Markets Bureau
Environmental Protection Branch
Department of the Environment
351 Saint-Joseph Boulevard
Gatineau, Quebec
K1A 0H3
Email: tarificationducarbone-carbonpricing@ec.gc.ca

Matthew Watkinson
Director
Regulatory Analysis and Valuation Division
Economic Analysis Directorate
Strategic Policy Branch
Department of the Environment
200 Sacré-Cœur Boulevard
Gatineau, Quebec
K1A 0H3
Email: RAVD.DARV@ec.gc.ca