We welcome the proposed…

We welcome the proposed amendments to expand the criteria for voluntary participants to exit the EPS program. To maximize the mutual benefits from this amendment, we recommend that the Ministry of the Environment, Conservation and Parks (MECP) make two revisions to the current proposal, related to the opt-out lock-out period, and the expiry of EPP notional allocations.

Opt-out Lock-out Period

We recommend that MECP refine the opt-out lock-out period, as the current proposal of a five-year lock-out period will have undue negative outcomes for Ontario businesses and create carbon leakage risk. These proposed revisions aim to prevent opportunistic re-entries while giving Ontario businesses flexibility to adapt to a dynamic regulatory context.

 
Best option:
• Revise the nominal lock-out period to three years, and add two potential exemptions:
- an exemption eliminating the lock-out period in the event of a federal/provincial change in the consumer carbon charge rate or schedule.
- an exemption allowing a shorter lock-out period, if approved by MECP on a case-by-case basis, in light of major changes to the former EPS participant’s business context. For example, major acquisitions/expansions which fundamentally change the participant’s interaction with the consumer carbon charge. This would prevent opportunistic entry/exit cycles while allowing businesses flexibility to re-enter the program for legitimate reasons.

Alternative option:
• Maintain the nominal lock-out period at five years, and add an exemption eliminating the lock-out period in the event of a federal/provincial change in the consumer carbon charge rate or schedule.

Current proposal from MECP:
• Maintain the nominal lock-out period at five years with no exemptions, leaving Ontario businesses subject to greater uncertainty about future changes to the consumer carbon charge and forced to ‘gamble’ with long-term cost impacts, while creating undue carbon leakage risks for businesses that opt-out.

Expiry of EPP Notional Allocations

Given the sudden and dramatic change made to the consumer carbon charge in March 2025, and downstream impacts on the EPS, we recommend that EPP notional allocations be available to opted out facilities for projects completed within 2 years after their opt-out application or their last day in the program, whichever is later. This will allow EPS participants to leverage the notional allocations to make significant reductions in greenhouse gas emissions across Ontario industry, while giving opted-out facilities a realistic timeframe to identify, validate, and implement emission reduction projects.

Thank you for the opportunity to contribute to this important consultation. Please do not hesitate to reach out if you require further information.