Output‑Based Pricing System Amendments

Summary#

These are final amendments to the Output‑Based Pricing System Regulations and the Environmental Violations Administrative Monetary Penalties Regulations under the Greenhouse Gas Pollution Pricing Act. The changes update how industrial emissions are measured and verified, tighten rules about using and suspending surplus emission credits when a province leaves the federal system, and take effect mainly on January 1, 2022 (with many parts treated as in force on January 1, 2021).

What it does#

• Limits and clarifies the use of surplus credits issued by the Minister when a province or territory is removed from the federal OBPS. The Minister can suspend credits in an account tied to facilities in that province, and suspended credits can later be reinstated for use in periods when the facility was eligible (credits remain usable only if issued within 5 calendar years of use).
• Clarifies that the minimum of 25% of a facility’s required compensation must be paid as an excess emissions charge starting with the 2022 compliance period (the rule applies to compensation owed for 2022 and after).
• Changes how emissions and production are calculated:
  • Removes the old rounding rules for production and GHG totals to improve precision; only the difference between emissions and the emissions limit must be rounded to a whole number.
  • Updates fuel combustion emission factors and on‑site transportation methods to use the 2020 GHGRP (Canada’s Greenhouse Gas Quantification Requirements).
  • Clarifies how captured CO2 that is permanently stored is first counted, then may be subtracted only if the storage project meets the Regulations’ storage criteria.
• Tightens verification rules for independent verifiers: a single verification body may verify no more than six annual reports for the same facility within any period of nine years.
• Clarifies timing for a facility’s first (partial) compliance period depending on its registration path (CRA registration date vs. covered‑facility certificate).
• Explains responsibilities that continue after a facility stops being a covered facility (reporting, compensation, record retention), including some record requirements that last 7 years after the facility stops being covered.
• Adjusts a specific output‑based standard: the standard for industrial potato processing was updated (new numerical value reflected in the Regulations).
• Makes related, mostly administrative changes in the Environmental Violations Administrative Monetary Penalties Regulations so enforcement penalties line up with the amended OBPS rules.

Who's affected#

• Facilities subject to the Output‑Based Pricing System Regulations — mainly large industrial emitters and some voluntary participants:
  • Mandatory participants typically emit 50 kt or more CO2e per year; voluntary participants generally emit 10 kt or more CO2e per year.
• Operators in sectors where OBPS standards apply, including electricity generation units (rules around units with added capacity of 50 MW or more are clarified) and the industrial potato processing sector.
• Holders of surplus credits (facilities that banked credits while under the federal OBPS).
• Verification bodies and third‑party auditors that check facility reports.
• The federal department administering the system (the Department of the Environment) and enforcement officers who use the Administrative Monetary Penalties rules.

If it’s unclear who is affected in a specific case (for example, borderline emitters or facilities that changed status in 2021), the Regulations provide the detailed tests and timing rules.

Why it matters#

• It protects the value and functioning of the federal emissions trading approach by preventing a sudden flood of surplus credits from provinces that leave the federal OBPS. That helps keep the price signal for reducing emissions meaningful.
• It makes emissions limits and reports more precise by updating emission factors to the 2020 GHGRP and removing certain rounding rules. That can slightly change facilities’ emissions limits — some go up a bit, some down — which affects how much they must pay or how many surplus credits they earn.
• It clarifies what former covered facilities must still do (reports, payments, record keeping), so companies and regulators know their ongoing obligations even after a facility leaves the system.
• Some changes are retroactive to January 1, 2021, so reporting or credits for the 2021 compliance period may be affected; most other changes take effect on January 1, 2022.