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Canada’s environment ministry launched a new fund last week to reinvest revenues from the federal government’s Output-Based Pricing System (OBPS) back into Canada’s green transition. The straightforwardly-named Output-Based Pricing System Proceeds Fund (OBPSPF) will support clean energy and industrial decarbonization projects in provinces where revenues were generated.
Canada’s federal carbon pricing law has two components: the fuel charge levied directly on fossil fuel sales, and the OBPS, a cap and trade-style program for large industrial emitters. The OBPS applies in provinces and territories lacking their own federally-compliant industrial emissions program. Participants must pay for above-the-cap emissions at the federal carbon rate (currently $40 per tonne, rising to $170 by 2030) or cover those emissions by purchasing qualified offsets or credits from other OBPS participants who emitted less than their cap limit.
The OBPSPF will initially manage approximately $160 million collected from the OBPS’s application in Manitoba, New Brunswick, Ontario, and Saskatchewan during the 2019 compliance period. Of those four provinces, only Manitoba remains entirely subject to the OBPS. New Brunswick’s provincial OBPS took effect on January 1, 2021, and Ontario’s Emissions Performance Standards program replaced the federal OBPS at the start of this year. Saskatchewan is only subject to the federal OBPS with respect to certain industrial sectors, whereas other sectors are covered by the province’s own industrial carbon pricing system.
OBPSPF funds will be distributed through two programs: The Decarbonization Incentive Program (DIP) and the Future Electricity Fund. The former “is a merit-based program to support clean technology projects that will help decarbonize industrial sectors over the long term and reduce GHG emissions”, and the latter “will support clean electricity projects and/or programs.” The DIP is now accepting applications for project funding.
Looking to learn more about Canadian carbon pricing? Check out our online course, Understanding Canadian Carbon Pricing, for those looking to learn more about carbon pricing.