Ontario’s Ministry of the Environment, Conservation and Parks (the Ministry) has launched public consultations on proposed regulatory amendments for the Emissions Performance Standards (EPS) program. The proposed changes are meant to ensure that the EPS program meets the updated benchmark under the Greenhouse Gas Pollution Pricing Act (the Act) set by the federal government for 2023-2030 (see our earlier bulletin on the Ministry’s prior EPS consultation here) as the current EPS program only applies to 2022. This bulletin briefly summarizes key proposed changes and provides important information on stakeholder participation in the consultation.
Carbon Price. The Ministry is proposing to align the EPS program and the price of excess emissions units (EEUs) with the minimum carbon price set out in the updated federal benchmark ($65 for the 2023 compliance period rising to $170 for the 2030 compliance period).
Program Scope. The Ministry is proposing to add the following sectors represented by the North American Industrial Classification System (NAICS) to the list of covered industrial activities based on a preliminary assessment of carbon leakage and competitiveness:
- Fruit and vegetable preserving and specialty food manufacturing;
- Meat product manufacturing;
- Beverage manufacturing;
- Converted paper product manufacturing;
- Plastic product manufacturing;
- Rubber product manufacturing;
- Forging and stamping;
- Spring and wire product manufacturing;
- Machine shops, turned product, and screw, nut, and bolt manufacturing;
- Engine, turbine and power transmission equipment manufacturing;
- Other general-purpose machinery manufacturing;
- Aerospace product and parts manufacturing;
- Office furniture (including fixtures) manufacturing;
- Other miscellaneous manufacturing; and
- Dairy product manufacturing.
Registration and Cessation of Coverage. The Ministry is proposing to allow EPS facilities that expect to emit at least 10,000 tCO2e/year within three years following a major retrofit or expansion to apply to register in the EPS program as soon as production has started to increase. The Ministry is also proposing to facilitate a pathway for an owner or operator of a covered facility that opted into the EPS program to voluntarily exit if the facility’s reported GHG emissions (the Reporting Amount in its GHG report) are less than 10,000 tCO2e for three consecutive years. Such facilities would be no longer be eligible to opt-in but would be required to register if a facility’s emissions meet the 50,000 tCO2e threshold.
Emissions Performance Standards. The Ministry is proposing removing the Method G (Energy-Use Standard) and Method H (Mobile Equipment Operation Standard) energy-based standards from the EPS Methodology. The Ministry is also proposing developing or adjusting (i) Facility-Specific Performance Standards; (ii) Sector-Wide Performance Standards; and (iii) Fixed Historical Performance Standard; and (iv) a process to request a new or adjusted performance standard.
Electricity Generation and Cogeneration. The Ministry is proposing to strengthen the Fossil Fuel Electricity Generation Performance Standard in the EPS Methodology from 370 tCO2e/GWh from 310 tCO2e/GWh and continue to exclude it from application of a stringency factor.
Stringency Factor. The Ministry is proposing to amend the stringency factor applied to performance standards and apply a decline rate of 2.4% in 2023 from the stringency factors in 2022, and 1.5% per year from 2024-2030. The Ministry is also proposing discontinuing the biomass use adjustment to the stringency factors starting in 2023.
Carbon Capture Utilization and Storage. The Ministry is proposing to recognize CO2 emissions that are captured at a covered facility and stored permanently in a storage project (e.g., geological storage) during a compliance period, as GHG emissions reductions at the covered facility.
Carbon Leakage and Related Competitiveness Assessment. The Ministry is proposing providing facilities in industries that are not listed in Schedule 2 of the EPS Regulation and/or those to be added as part of the proposed regulatory amendments, the ability to request their sector be assessed for competitiveness and carbon leakage risk.
Public Reporting. The Ministry is proposing to publish information on the key features, outcomes, and impacts of the EPS program, including:
- Number of registered facilities: total and by sector
- Compliance obligations: total and by sector
- GHG emissions covered: total and by sector
- Number of EEUs purchased: total and by sector
- Number of EPUs distributed: total and by sector
- Compliance broken out by method (i.e., purchase of excess emissions units, use
- of emissions performance units)
- Total number of compliance instruments by status (e.g., active, retired, expired)
- Number of compliance instrument transfers: total and by sector
- Compliance instrument holdings: total, by compliance instrument type and by sector
- Total number of facilities that are in compliance
Cost Savings. The Ministry’s modelling provides direct compliance costs from the proposed regulatory amendments to the EPS program are expected to be lower than costs under the federal output-based pricing system (OBPS), amounting to a cumulative cost savings of approximately $1.1 billion for the 2023-2030 period.
Public Consultations. Interested stakeholders are invited to submit comments on the proposed changes online by October 10, 2022.
For assistance with preparing comments or to discuss the contents of this bulletin, please contact Lisa DeMarco at lisa@resilientllp.com.
