Expanding criteria for Voluntary Participants to exit the Emissions Performance Standards (EPS) program

Ontario industries are facing significant challenges related to the current trading environment. During these challenging times, we are proposing the following updates to the Emissions Performance Standards (EPS) program.

• provide additional flexibility to voluntary facilities currently in the program
• require additional manufacturers of petroleum-based products with significant greenhouse gas emissions to participate in the program

Amendment details:

1. Expanding circumstances under which voluntary participants can exit the Emissions Performance Standards (EPS) program

Context: The EPS program has two categories of participants: facilities that are required to participate and those that voluntarily join the program.

Mandatory participants are facilities with annual emissions over 50,000 tonnes of carbon dioxide equivalent (CO2e) in any year since 2014 that are engaged in an industrial activity in items 1-38 of Schedule 2 of the EPS regulation.

Voluntary participants are facilities with annual emissions over 10,000 tonnes CO2e that are currently either:

• engaged in an industrial activity in items 1-38 of Schedule 2 of the EPS regulation and have not had annual emissions above 50,000 tonnes in any year since 2014
• engaged in an industrial activity listed in item 39 but not in items 1-38 of Schedule 2 of the EPS Regulation.

Currently, voluntary participants can only exit (request cancellation of their registration) the EPS program if they cease operations or emit less than 10,000 tonnes CO2e annually for three consecutive years.

Facilities that exit the EPS program are not able to re-register unless the facility subsequently meets the criteria that require them to participate.

Facilities that exit the program continue to:

• able to sell any credits (called emissions performance units) they hold
• have obligations under the EPS and greenhouse gas (GHG) emissions reporting programs (for example, EPS compliance obligations for the year the facility exited, annual GHG reporting requirements, correcting any errors in prior GHG reports

Proposed changes: Allow any facility that meets the criteria for voluntary participant at the time of the request to leave the EPS program.

Effective date:

The exit from the program would be effective:

• April 1, 2025, if the request is made on or before December 31, 2025
• December 31 in the year the request is approved by the Director if the request is made after December 31, 2025

Compliance obligations:

Facilities that exit the program would have compliance obligations under the EPS program for the portion of the year from January 1 to the effective date of the exit.

Re-registering in the program:

Facilities that choose to exit would not be able to re-register in the program for the next five years unless the facility subsequently meets the criteria that require them to participate.

Rationale: provides voluntary participants more flexibility to decide the best course of action for their business given the decision by the federal government to set the federal fuel charge to zero as of April 1, 2025.

2. Requiring facilities engaged in Petroleum and Coal Product Manufacturing to register in the EPS program

Context: Petroleum and coal product manufacturing is currently included in item 39 of Schedule 2 of the EPS regulation. This means that facilities engaging in this activity do not meet the definition of a mandatory facility.

Proposed change: Add petroleum and coal product manufacturing to the list of mandatory industrial activities in Schedule 2 of the EPS​​​​​​​​​​​​​​ regulation. This will ensure that manufacturers of petroleum-based products in this category (for example, lubricants, oils and coke) with significant greenhouse gas emissions (annual emissions equal to or greater than 50,000 tonnes CO2e), which are currently voluntary participants, are classified as mandatory participants in the EPS​​​​​​​ program.

Rationale: All known petroleum refineries and petrochemical manufacturers with annual emissions above 100,000 tonnes CO2e are already mandatory participants in the EPS​​​​​​​​​​​​​​ program. Ontario is proposing to level the playing field for manufacturers of petroleum-based products by requiring additional manufacturers of petroleum products in the proposed category with annual emissions equal to or greater than 50,000 tonnes to participate in the program.

The proposed changes would apply to

• Ontario Regulation 241/19: Greenhouse Gas Emissions Performance Standards regulation (O. Reg. 241/19 or EPS Regulation).
• GHG Emissions Performance Standards and Methodology for the Determination of the Total Annual Emissions Limit (the EPS Methodology).
• Ontario Regulation 390/18: Greenhouse Gas Emissions: Quantification, Reporting and Verification regulation (O. Reg. 390/18 or the Reporting Regulation).
• Guideline for Quantification, Reporting and Verification of Greenhouse Gas Emissions (the guideline).

Regulatory impact analysis

These amendments are expected to reduce costs for the facilities that choose to exit the program. Since smaller facilities (for example, voluntary participants) accounted for approximately seven per cent of emissions covered by the EPS​​​​​​​ program in 2023, the proposed changes are not expected to have a significant impact on provincial GHG​​​​​​​ emissions.

Other information

The federal carbon pricing scheme:

The federal government made regulations to:

• set the consumer federal fuel charge to zero effective April 1, 2025
• shorten the compliance period to January 1 to March 31, 2025, for voluntary Output-Based Pricing System (OBPS) participants where designation as a covered facility is cancelled by the Minister in 2025.

The Greenhouse Gas Pollution Pricing Act allows the Minister to cancel the designation of an OBPS covered facility upon request.

Ontario’s Emissions Performance Standards Program

The EPS​​​​​​​ program is intended to:

• encourage the industrial sector to reduce GHG​​​​​​​ emissions
• minimize competitiveness impacts and the risk of production leaving the province for other jurisdictions with less stringent climate policies.

Ontario’s GHG​​​​​​​ Reporting Program

Certain businesses and industrial facilities, including those in the EPS​​​​​​​ program, are required to report their annual GHG​​​​​​​ emissions under Ontario’s GHG​​​​​​​ reporting program.

The EPS​​​​​​​​​​​​​​ program is supported by the GHG​​​​​​​ Reporting program, which provides the required verified emissions, production and emissions limit data for all registrants in the EPS​​​​​​​ program. These are needed to determine either a facility’s compliance obligation or the number of emissions performance units (EPUs) it is eligible to receive for emitting less than its emissions limit.