Output-Based Pricing System Amendments

Summary#

This is a proposed set of changes to the federal carbon pricing rules called the Regulations Amending the Output-Based Pricing System Regulations, published on June 5, 2021. The changes would tighten rules about how surplus emissions credits are handled, update how facilities measure emissions, and fix some technical issues; the public had 30 days to comment after publication. This is a proposal, not final law yet.

What it does#

• Strengthens rules about surplus credits under the Output-Based Pricing System Regulations so credits issued in a province that has been removed from the federal backstop can be suspended or limited. Suspended credits can be restored only to cover periods when the province was in the federal system.
• Clarifies that a minimum of 25% of compensation for excess emissions must be paid by cash (the “excess emissions charge”) for the 2022 compliance period and afterwards.
• Removes the old rounding rule for reported production and emissions (to improve precision). Instead, only the difference between emissions and the limit is rounded to the nearest whole tonne.
• Updates emission factors and some calculation methods to use the 2020 GHGRP (Canada’s Greenhouse Gas Quantification Requirements) and asks facilities to use the 2020 method for on‑site transport emissions.
• Clarifies when CO2 that is captured and permanently stored can be deducted from a facility’s total emissions (it must first be counted, then removed in the accounts).
• Changes verification rules so a single verification body cannot verify more than six annual reports for the same facility within any nine‑year period.
• Requires a person who expects to stop being the “responsible person” for a covered facility to notify the Minister at least 30 days in advance.
• Raises the output‑based standard for industrial potato processing to 0.0995 tonnes CO2e per unit (this increases the emissions limit for those facilities).
• Sets the general coming‑into‑force date as January 1, 2022, while many technical clarifications and some updates are treated as having effect from January 1, 2021 and apply to the 2021 compliance period. Remember: these dates apply if the proposal is finalized.

Who's affected#

• Industrial facilities subject to the federal OBPS—generally those emitting 50 kilotonnes (kt) of CO2e or more per year.
• Facilities that voluntarily opt into the OBPS (typically those with emissions around 10 kt or more).
• Facilities in provinces that might move off the federal backstop to a provincial system.
• The potato‑processing industry (their standard is specifically changed).
• Electricity generation units and certain boiler units that have undergone capacity changes (they face clarified rules).
• Verification bodies (limits on how often the same body can verify a single facility).
• A small number of businesses will see a tiny increase in paperwork: roughly 122 currently covered facilities; the government estimates annualized administrative costs around $320 total and about $40 per facility (spread over 10 years) for the new notification requirement when responsibility for a facility changes.

Why it matters#

• Protects the value of surplus credits: if provinces leave the federal system, unrestricted use of previously issued credits could flood the market and reduce the incentive for facilities to lower emissions. These changes aim to prevent that sudden drop in credit value.
• Makes emissions accounting fairer and more accurate by updating emission factors and removing crude rounding rules. That affects facilities’ emissions limits and therefore how much they must pay or can sell as credits.
• Clears up practical questions about registration, reporting, and what happens when a facility stops being covered. That reduces confusion for companies and for the department that runs the program.
• The potato‑processing change means those facilities will generally face a looser limit (so lower payments or more surplus credits), while other changes mainly improve clarity and measurement without changing the overall environmental goal of the program.
• Because this was published as a proposal, the rules are not final; interested parties could comment during the consultation window following the June 5, 2021 publication.