January 15, 2024 Melissa…

January 15, 2024

Melissa Ollevier
Financial Instruments Branch
40 St. Clair Avenue West
Floor 8
Toronto, ON
M4V 1M2
Canada

Submitted via email: Melissa.Ollevier@ontario.ca

Re: Proposed Amendments to the EPS Regulation and the EPS Methodology

Ms. Ollevier,

Thank you for the opportunity to provide input on the proposed amendments to the ERO 019-7649: Regulatory amendments to clarify program requirements and improve program efficiency for Emissions Performance Standards (EPS) and GHG Reporting programs. The OFIA and the Pulp and Paper Coalition represent over forty companies across Ontario, many of which are participants in the EPS. Ontario’s forest industry currently employs 142,000 people across all regions of the province and generates $20 billion in revenue annually. Wood and forest products sourced from Ontario are internationally recognized as coming from sustainable and responsible sources, which makes Ontario well-positioned to be a leader in the circular bio-economy.

The OFIA supports the made-in-Ontario EPS program and appreciates the ongoing commitment to refine and improve it. The Ministry of Environment, Conservation, and Parks’ (MECP) recent decision for EPS proceeds to be notionally allocated to facilities based on their 2022 compliance payment, is a positive measure to foster innovation for further decarbonization.
To ensure that the proposed amendments to the EPS will continue to enable innovation within our sector, we ask that you consider the following:
Sector-based Standards

Currently, pulp and paper manufacturing facilities are required to be registered under the EPS regulation. In the pulp and paper sector, a broad spectrum of product production types and grades require different emission intensities and are driven by customers’ preferences and needs. For instance, specialty papers require additional drying to meet quality specs. Sometimes, these specialty mills will not have comparable mills required to calculate sector-based benchmarks. As such, we believe that a sector-based approach puts facilities with customer requests for a specialty product requiring higher emission intensity at a disadvantage.

Similar to pulp and paper, there is also a diversity of wood products being manufactured across Ontario. Currently, most wood product facilities do not meet the requirements to be regulated under EPS, but some facilities have chosen to opt in. Given that only three facilities are currently enrolled, more data points are needed to calculate an average emission benchmark, which would be required to implement a sector-based approach for wood product facilities.

We recommend that Method E (Facility Sector Performance Standard) continue to be applied to calculate emissions intensity performance standards for wood products and pulp and paper facilities instead of Method A (Sector-based approach).

BEI Calculations and Production Parameters

As mentioned above, a diversity of products are produced in the forest sector. Even within individual facilities, there are varying product types and grades, which result in a variation of emission intensities. This product change within a facility can be infrequent and primarily driven by customer preferences and needs over time. Given this, we recommend that baseline emission intensity (BEI) parameters calculate annual emission limits based on a 5-year average (instead of 3 years) to better account for the various product mixes.

As only a few wood product facilities are enrolled in the EPS program, we would appreciate the opportunity to help inform MECP in developing production averages to inform yearly allowable limits for the Method E calculation. Given this, production values should be determined at the facility level. Standard units, if required, should be reflective of product particularities and can be developed with the aid of the OFIA.

Recognizing Significant Transformation in the Pulp and Paper Sector

We support MECP’s approach to recognizing industries undergoing significant transformations and making substantial investments to transition to different technologies. As an early adopter of decarbonization technologies, Ontario’s pulp and paper sector has reduced greenhouse gas (GHG) emissions by nearly 60% over the last 20 years . The remaining investments required to reduce greenhouse gas emissions further will require significant time and investments (e.g., fuel switching for lime kilning production). To account for the past investments and transformations made to decarbonize the pulp and paper sector, we request that special considerations be extended to the pulp and paper sector be recognized (e.g., transitional BEI calculation and reduced stringency factors).

Facility Compliance Obligations – Idling and Re-Starting Operations

While there have been significant transformations within the pulp and paper sector, the sector still faces unique challenges due to changes in market demands. As a part of this transformation, considerable investments have been made to supply high consumer demand for packaging, tissue paper, advanced chemicals, and pulp for hygiene products and composites. However, successfully implementing the transition at the speed market conditions have changed has been challenging. Unfortunately, in some cases, this has resulted in mill curtailments or idling.

Under the regulation, even though there is no production at idled mills, these facilities are still required to pay proceeds for greenhouse gas emissions to maintain systems. These are difficult situations that our members do not want to prolong longer than necessary. This is particularly important for communities who rely on these mills for employment opportunities. We, therefore, recommend that provisions be included to better address situations where a facility must idle or curtail operations due to market conditions to reduce barriers in restarting these mills. As a part of these provisions, the consideration of a transition period to re-start the facility before EPS dues would be required would help reduce financial barriers from a company or potential investors looking to re-start the mill.

Facility Compliance Obligations – Emerging Markets for Biodegradable Replacements

With increased market demands for innovative products to support the circular economy, the pulp and paper industry is well-suited to providing new biodegradable alternatives for single-use plastics and other personal care products. In some cases, these products can be more emission-intensive than traditional wood products but can replace more carbon-intensive, non-biodegradable products. and biomaterials at scale.

For example, Thunder Bay Pulp and Paper is establishing a new lignin extraction pilot plant to research and develop lignin and sugar bio-products. Projects are also underway to increase the commercial readiness of lignin-based adhesives in cross-laminated timber (CLT) for use in mass timber architectural projects. Through high-temperature pyrolysis, the forest sector can produce green hydrogen and renewable natural gas, and the steel industry is investing millions into biochar – a drop-in replacement to reduce reliance on fossil fuels and lower carbon emissions. There is also increased interest and opportunities to manufacture more biofuels as a substitution for fossil fuels, such as biodiesel.

To reduce barriers to prevent future investment and scale up innovative product alternatives using wood products, we recommend that the proposed adjustments in determining compliance obligations for extended periods apply to facilities undertaking projects to manufacture renewable or lower-carbon alternative essential products.

Renewable Natural Gas (RNG)

The OFIA supports the expansion of eligibility for RNG to remove barriers to further use. However, to clarify the applicability of the RNG provisions and meet the intent of this new provision, we request that self-produced biogas be included in the regulation, in addition to biogas sourced from the distribution system. This would help facilities leverage opportunities and make necessary investments to produce their own biogas from wood residue. It would be particularly beneficial for facilities in remote regions where it is not possible to source from the distribution system.

Thank you for your time and consideration of our comments. If you have any follow-up questions on the information provided in this submission, we would be happy to discuss this further with you and your team at MECP. I can be reached at 519-933-1231 or stodgham@ofia.com.
Sincerely,

Sarah Todgham, R.P.F.
Policy Manager
Ontario Forest Industries Association
C: 519-933-1231
E: stodgham@ofia.com