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Canada’s federal ministry of the environment and climate change recently announced it will review Output-Based Pricing System (OBPS) regulations with an eye to increasing emission reductions, covering additional industrial activities, correcting standards not aligned with activities performed by participating facilities, and improving efficiency.
The OBPS is a cap and trade-type program that regulates greenhouse gas (GHG) emissions by large industrial polluters. Along with the fuel charge, it is a major component of Canada’s federal emission pricing system promulgated pursuant to 2018’s Greenhouse Gas Pollution Pricing Act. It applies as a ‘backstop’ program in those provinces lacking a sufficient provincial industrial emission pricing system.
Increasing Emission Reductions
The ministry will consider an “annual tightening rate post-2022” to gradually increase costs of emissions covered under the OBPS. However, since OBPS participants can pay for emissions above their applicable cap at the federal carbon price, and the government already announced its intent to raise the price post-2022, this development seems obvious unless OBPS rates are to diverge from fuel charge rates (and there’s no indication this will be the case).
The ministry will consider other means of achieving OBPS emission reductions, including by “conduct[ing] a scan” of technologies and processes that may benefit OBPS participants in their ability to lower emissions.
Covering New Activities
The ministry identified 15 activities across six industrial sectors it intends to subject to output-based standards.
Oil and Gas
Oil sands mining
Mining
Salt mining
Metal Manufacturing
Aluminium production from alumina
Calcined petroleum coke production for use in aluminium production from alumina
Anode production for use in aluminium production from alumina
Steel rolling
Chemicals
Production of ethylene glycol
Production of biodiesel
Production of tires
Food Processing
Malt manufacturing
Slaughtering and dressing of livestock (except poultry)
Manufacturing of softwood veneer and plywood
Wood Products
Sawmills
Manufacturing of particle board and fibreboard
Manufacturing of waferboard
Correcting Standards
The ministry will review standards where an activity defined in the OBPS regulations does not align with the activity actually performed by a program participant, and where a sector is undertaking or looking to undertake activities that are not covered by OBPS standards, but perhaps should be.
The ministry will also look to make corrections where significant data errors have come to light.
Improving Efficiency
The ministry will seek to better harmonize GHG measuring methodologies between the OBPS and federal Greenhouse Gas Reporting Program. And subject to the accumulation of more program data, the ministry intends to review regulations related to compliance flexibility.
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The ministry is currently seeking stakeholder feedback regarding its plans. Interested parties are asked to submit comments to ec.tarificationducarbonecarbonpricing.ec@canada.ca by March 29, 2021.