Making polluters accountable: Industrial Emission Performance Standards

ERO number
013-4551
Notice type
Regulation
Act
Environmental Protection Act, R.S.O. 1990
Posted by
Ministry of the Environment, Conservation and Parks
Notice stage
Decision
Decision posted
Comment period
February 12, 2019 - March 29, 2019 (45 days) Closed
Last updated

This consultation was open from:
February 12, 2019
to March 29, 2019

Decision summary

We are proceeding with Ontario’s Emissions Performance Standard and complementary reporting amendments to ensure polluters pay their fair share for their greenhouse gas emissions, while also ensuring industry continues to make advances to help Ontario achieve its share of Canada’s 2030 target.

Decision details

Emissions Performance Standards (EPS) are part of Ontario’s commitment in Preserving and Protecting our Environment for Future Generations to regulate industrial emissions.

Ontario’s Environment Plan includes the development of Emissions Performance Standards (EPS) to:

  • encourage the industrial sector to reduce greenhouse gas emissions
  • maintain competitiveness of Ontario businesses
  • minimize carbon leakage – the risk of production leaving the province for other jurisdictions with less stringent climate policies.

Ontario’s system includes flexible compliance mechanisms that include receiving compliance units as an incentive for performing better than the standard, or payments to purchase compliance units from the government.

We are proceeding with Ontario’s Greenhouse Gas Emissions Performance Standard (EPS) and amendments to the Greenhouse Gas, Quantification, Reporting and Verification regulation (Reporting Regulation, Ontario Regulation 390/18) so that we can reduce greenhouse gas (GHG) emissions from large emitters, keep Ontario businesses competitive and minimize carbon leakage.

The Emissions Performance Standard (EPS) program establishes limits on greenhouse gas emissions. Covered facilities are required to acquire compliance units if the limits are not met.

We developed this program as an alternative to the Output-Based Pricing System (OBPS) component of the federal carbon pollution pricing system that is now in effect in Ontario.This Made-in-Ontario solution will ensure that polluters are accountable for their actions with a system that is tough but fair, cost-effective and flexible to the needs and circumstances of our province. We will also ensure strong enforcement of the rules.

Amendments to the Reporting Regulation

Complementary amendments to the Reporting Regulation support the EPS Program by providing:

  • verified emissions data
  • verified production and annual emissions limit data

This data is used to determine the total annual emissions limit under the EPS regulation.

The verified total annual emissions limit and the verified emissions are used to determine whether a facility:

  • exceeded its emissions limit, or
  • will receive compliance units for performing better than their standards

Additional amendments include:

  • changing reporting for electricity importation from GHG emissions to megawatt hours
  • removing verification from this activity

EPS Program implementation timelines

The EPS program will apply to greenhouse gas (GHG) emissions that are emitted as early as January 1, 2019 by the covered facilities.

The compliance obligation will apply for the first time in the year the federal government removes Ontario from Part 2 of Schedule 1 of the Greenhouse Gas Pollution Pricing Act (GGPPA).

Only the registration provisions of the EPS regulation currently apply.

Other key provisions (e.g. performance standards, sales of compliance units, compliance obligations) will not apply until Ontario is removed from Part 2 of Schedule 1 of the GGPPA (i.e. the federal OBPS).

Some of the amended provisions of the Reporting Regulation (e.g. reporting and verification of the Total Annual Emissions Limit) will also not apply until Ontario is removed from Part 2 of Schedule 1 of the GGPPA.

The EPS Regulation incorporates by reference the GHG Emissions Performance Standards and Methodology for the Determination of the Total Annual Emissions Limit. Amendments have also been made to the Guideline for Quantification, Reporting and Verification of Greenhouse Gas Emissions which is incorporated by reference in the Reporting Regulation.

Potential future amendments

When Ontario is removed from Part 2 of Schedule 1 of the GGPPA, we expect further amendments to the EPS and Reporting Regulation to:

  • address transition of regulated entities from the federal program to Ontario’s program
  • expand the EPS program to include additional sectors

We may propose additional amendments in fall 2019 to further reduce burden on registrants. These could include:

  • harmonizing reporting requirements with the federal government’s requirements
  • enabling a covered facility to apply to the Director to change from the ‘Energy Use method’ to the ‘Energy Use Intensity method’ as the basis for setting the facility limits
  • other administrative amendments

Comments received

Through the registry

89

By email

30

By mail

0
View comments submitted through the registry

Effects of consultation

We received a total of 119 comments from a wide range of stakeholders including:

  • members of the public
  • industries
  • associations
  • consulting firms
  • environmental non-governmental organizations

We have taken into consideration the comments received from the consultation and grouped them into the following themes:

1. Preference for the Ontario EPS Program over the federal OBPS

Several stakeholders prefer

  • participating in Ontario’s EPS rather than the federal OBPS
  • harmonizing reporting with the federal government to reduce regulatory burden

Response

  • Ontario is committed to working with the federal government to accept our made-in-Ontario emission performance standards instead of the federal output-based pricing system, to avoid double regulation for industry.
  • until the federal government makes a decision to remove Ontario from the application of the federal program, industry GHG emissions will only be regulated under the federal output-based pricing system

2. Competitiveness and risk of carbon leakage

Several stakeholders are concerned that an EPS program could inadvertently cause production to leave the province for other jurisdictions that do not have equivalent carbon pricing policies. This could potentially increase global emissions.

Response

  • the stringency factor that applies to each facility’s Total Annual Emissions Limit (TAEL) considers competitiveness impacts for industry in order to minimize carbon leakage
  • in recognition of the significant reductions made in the electricity sector, a stringency factor will not be applied

3. Emissions thresholds

Some stakeholders suggest we should consider

  • mandatory emissions thresholds of 25,000 tonnes/year or 50,000 tonnes/year
  • either a voluntary opt-in threshold with no lower limit, or a threshold between 10,000 tonnes/year and the mandatory threshold

Response

  • to harmonize with the federal OBPS, the mandatory emissions threshold will be 50,000 tonnes/year
  • smaller facilities with emissions between 10,000 tonnes/year and the mandatory threshold can voluntarily participate (opt-in) in the Ontario EPS program

4. Support for banking and trading of compliance units indefinitely

Stakeholders suggest we should consider allowing indefinite banking of compliance units and trading of compliance units between facilities, sectors, and beyond Ontario.

Response

  • facilities with emissions below the facility’s TAEL will receive emission performance units that represent the portion of their emissions that are below the standard
  • they can bank these for up to 5 years (usable for five compliance events), can use them to meet current and future compliance obligations (subject to banking rule), or trade to other regulated entities in the program
  • this creates an incentive for entities to reduce emissions below their limit when it is cost effective to do so

5. Recognition for biomass

Some stakeholders suggest the program should recognize the significant amount of biomass used as energy input by some Ontario facilities.

Some of the facilities in the pulp and paper sector (e.g., integrated pulp and paper mills) already use significant amounts of biomass as energy input and may have limited additional cost–effective abatement opportunities in the near term).

Response

  • facilities that use a significant amount of biomass as fuel may have a biomass adjustment factor applied to their TAEL, thereby reducing their compliance obligation under the program

6. Cogeneration efficiency

Some stakeholders suggest the efficiency assumption (90% conversion of total energy in natural gas fuel to steam and electricity) that informs the performance standard for cogeneration is too stringent. As a result, industrial facilities are not able to achieve the efficiencies needed to meet the proposed emission performance standard for cogeneration.

Response

  • the cogeneration performance standard has been changed from what was in the regulatory proposal, to lower the efficiency component to 80%.
  • this change better aligns with what is achievable by a highly efficient cogeneration unit

Supporting materials

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Some supporting materials may not be available online. If this is the case, you can request to view the materials in person.

Get in touch with the office listed below to find out if materials are available.

Financial Instruments Branch
Address

40 St. Clair Avenue West
Floor 4
Toronto, ON
M4V 1M2
Canada

Office phone number

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Original proposal

ERO number
013-4551
Notice type
Regulation
Act
Environmental Protection Act, R.S.O. 1990
Posted by
Ministry of the Environment, Conservation and Parks
Proposal posted

Comment period

February 12, 2019 - March 29, 2019 (45 days)

Proposal details

Emissions Performance Standards are part of Ontario’s commitment in Preserving and Protecting our Environment for Future Generations to regulate industrial emissions.

Ontario’s Environment Plan includes the development of Emissions Performance Standards (EPS) to:

  • encourage the industrial sector to reduce greenhouse gas emissions
  • maintain competitiveness of Ontario businesses
  • minimize carbon leakage – the risk of production leaving the province for other jurisdictions with less stringent climate policies.

Implementing an Ontario EPS will provide flexibility for Ontario circumstances as an alternative to the federal output based pricing system (OBPS) portion of the federal Greenhouse Gas Pollution Pricing Act, while Ontario’s constitutional reference regarding the GGPPA is pending.

Proposed Emissions Performance Standards

Ontario is considering flexible compliance mechanisms that would include receiving compliance units as an incentive for performing better than the standard, for voluntary emission reductions by others, or payments to purchase compliance units from the government.

Any payments we collect under the program could contribute to a greenhouse gas (GHG) fund focused on supporting industry in greenhouse gas emission reductions.

Consulting on the proposed EPS

We welcome comments on the following components of the proposed EPS:

1. Program scope

At a minimum, we propose to regulate the same sectors to be covered by the federal output based pricing system (OBPS) to:

  • simplify reporting and compliance and
  • provide clarity for Ontario businesses

We are also considering including additional sectors in the program such as:

  • institutions
  • greenhouse operators
  • thermal energy supply

We look forward to comments from these sectors regarding potential inclusion.

2. Emissions threshold and opt-in provision

We propose to establish:

  • a mandatory emissions threshold at either 25,000 or 50,000 tonnes of carbon dioxide equivalent (CO2e) per year
  • facilities with GHG emissions between 10,000 tonnes of CO2e per year and the mandatory threshold would be allowed to voluntarily participate (opt-in) to the program beginning in 2019
  • complementary amendments would be made to the Greenhouse Gas Emissions: Quantification, Reporting and Verification regulation (O. Reg. 390/18) to align the verification threshold with the mandatory threshold for the EPS program.

3. Competitiveness/ carbon leakage risk assessment and determination of stringency factor

We propose to establish separate standards for fixed process and non-fixed emissions. This allows different stringency factors to be applied since fixed process emissions are harder to reduce. The stringency factors will also account for the risk of carbon leakage.

We propose to use emissions intensity and trade exposure to determine carbon leakage risk.

4. Compliance obligations/ flexibility mechanisms

We are intending to have the program in place by Summer 2019 and to have it apply to emissions as of January 1, 2019. Regulated facilities under the Ontario EPS would have to:

  • submit an annual compliance report in June in respect of the GHG emissions for the previous year (emissions from January 1 to December 31)
  • demonstrate compliance annually, starting in December 2020, with respect to the previous year’s emissions.

A facility’s compliance obligation would be the difference between the facility’s total emissions and its Annual Emission Limit (AEL).

A facility could meet the EPS by:

  • reducing their GHG emissions
  • purchasing and/or using compliance units to pay for GHG emissions that exceed the standard.

Payments we collect through the program could go into a GHG emission reduction fund that could support greenhouse gas reduction projects in industry.

Purpose of regulation

The purpose of the EPS regulation is to reduce greenhouse gases in the industrial sector.

Supporting materials

View materials in person

Some supporting materials may not be available online. If this is the case, you can request to view the materials in person.

Get in touch with the office listed below to find out if materials are available.

Financial Instruments Branch
Address

40 St. Clair Avenue West
Floor 4
Toronto, ON
M4V 1M2
Canada

Office phone number

Comment

Commenting is now closed.

This consultation was open from February 12, 2019
to March 29, 2019

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