Emissions Performance Standard (EPS) Ontario

Regulatory Amendments to the Emissions Performance Standards Program for the 2023-2030 Period

On December 13th, 2022, the Ministry of the Environment, Conservation and Parks (MECP) posted regulatory amendments to the current Emissions Performance Standards (EPS) Program, which came into effect on January 1st, 2023.

In this blog post, we will provide an overview of the EPS program, including the changes made to Ontario’s EPS Program regulatory framework and complementary changes to the GHG Emissions Reporting Program regulatory framework. Additionally, we will discuss the measures and strategies implemented to meet the updated federal benchmark, as well as the implications for industry participants in Ontario.

EPS Program

Since 2018, the Government of Ontario has been taking actions to support the province’s goal to “ensure a green, prosperous Ontario for future generations” (Made-in-Ontario Environment Plan) which includes a commitment to lowering greenhouse gas emissions. Ontario has finalized and received federal recognition for the Emissions Performance Standards (EPS) program and was formally removed from the application of the federal output-based pricing system (OBPS).

The EPS program is used to determine emissions limits for industrial facilities which emit greenhouse gases (GHGs). The standards require emitters to either reduce their emissions year-after-year or pay for exceeding the emissions limits.

The Regulation defines “EPS facilities” as a facility which carries out industrial activity and any other sites operated in an integrated manner with the industrial activity. Certain EPS facilities must register for the EPS program due to the amount of GHGs they emit, based on the industrial activity that is carried out at the facility, or based on past reporting requirements. Ontario facilities are currently required to register in the EPS Program if:

1. The facility reported Greenhouse Gas (GHG) emissions of 50,000 tonnes or more of carbon dioxide equivalent (t CO2e) to the MECP for any year since 2014; and,
2. The primary industrial activity engaged in at the facility is listed in paragraphs 1 to 38 of Schedule 2 of the EPS Regulation.

Ontario facilities may opt-in to the EPS program under section 4 of O. Reg. 241/19 if it meets the definition of “EPS facility” and fits the following criteria:

1. The facility reported Greenhouse Gas (GHG) emissions of 10,000 or more tonnes of CO2e to the MECP for any year since 2014; and,
2. The primary industrial activity engaged in at the facility is listed in paragraphs 1 to 38 of Schedule 2 of the EPS Regulation.

Background: Federal Benchmark Amendments

The Pan-Canadian Approach to Pricing Carbon Pollution (the Federal Benchmark) was published by the Government of Canada on October 3, 2016, establishing Canada’s approach to carbon pricing for the 2018-2022 period. The Federal Benchmark consists of a fuel charge and an output-based pricing system (OBPS) for large industries, with minimum national criteria that all systems must meet.

On August 5th, 2021, the Government of Canada published an updated Federal Benchmark to replace the previous one that would be applied to the 2023-2030 period. These changes included an update on the minimum national price to $65 per tonne CO2e in 2023, and set to increase by $15 per year to $170 per tonne CO₂e in 2030. It also includes a directive for provinces and territories to implement and maintain a recognized carbon pollution pricing system, with minimum criteria and assessments depending on the system implemented.

EPS Amendments

The EPS Program’s regulatory amendments were introduced to comply with the updated Federal Benchmark mandated by the federal government. The goal is to ensure that Ontario’s EPS Program remains a viable alternative to the federal OBPS and supports the province’s efforts to reduce GHG emissions. The Proposal includes regulatory amendments to the EPS Regulation and the GHG Emissions Performance Standards and Methodology for Determination of the Total Annual Emissions Limit, as well as the Reporting Regulation and the Guideline for Quantification, Reporting, and Verification of Greenhouse Gas Emissions. The approved EPS amendments will be implemented for the 2023-2030 period. The pricing structure will align with the minimum carbon pollution pricing specified in the updated Federal Benchmark. Key regulatory updates include:

• Alignment with carbon prices set out in federal benchmark – minimum carbon pollution price of $65 per tonne CO2e in 2023 rising by $15 per year to $170 per tonne CO2e in 2030;
• The price of excess emissions units (EEUs) set out in the EPS Regulation is $65 in 2024 (e.g., for the 2023 compliance period), and increases by $15 per year to $170 in 2031 (e.g., for the 2030 compliance period); and,
• Apply a decline rate to stringency factors, 2.4% decline in 2023 and then an annual 1.5% decrease from 2024-2030.

Additionally, Schedule 2 of the EPS Regulations was modified to include sectors that are at risk of carbon leakage and competitiveness impacts from carbon pollution pricing, as required by the updated Federal Benchmark. The following North American Industrial Classification System (NAICS) codes were added to the list of industrial activities in Schedule 2 of the EPS regulation. 

Compliance Obligations

Once admitted into the EPS program, facilities will be required to comply with the carbon pricing program and fulfil the GHG reporting obligations as stipulated by the EPS program and the Federal Greenhouse Gas Reporting Program (GHGRP). Registered facilities must comply with extra reporting requirements under the EPS program.

Implications for Facilities

Regulated emitters in Ontario will need to comply with updated requirements of the provincial EPS Program, including measures to decrease a facility’s Total Annual Emissions Limit (TAEL) in case of non-compliance. While compliance requirements for existing emitters remain largely unchanged, businesses can take advantage of the compliance relief. Additionally, sectors that were added to the list of covered industrial activities should pay particular attention to the changes and take steps to comply with Program requirements. Businesses that expect to emit 10,000 or more tonnes of CO₂e within three years of a retrofit or expansion should also consider applying for the Program.

It is important to note that existing regulated facilities with significant compliance obligations should explore options for reducing their GHG emissions, particularly in light of the federal government’s plan to reach a minimum national price on carbon pollution of $170 per tonne by 2030. This plan may impact the bottom line of facilities with emissions-intensive operations, but it also creates significant financial opportunities for emission reduction technologies and projects.

HOW SCV CAN HELP

At SCV Consulting Ltd., we are experienced in greenhouse gas emissions reporting and verification under several regulations including the Ontario EPS and federal OBPS programs. We can help to quantify or verify your emissions and reporting to ensure it aligns with the EPS program and help you mitigate any additional costs associated with over-reporting or under-reporting greenhouse gas emissions.

Reach out to us today to see how we can work together to assist with your EPS reporting in Ontario!