Understanding Ontario’s Rules for Cleaner Air: The Emissions Performance Standard Program
Ontario’s Emission Performance Standards (EPS) Program is an initiative by the provincial government to curb industrial greenhouse gas emissions. But how does it work, and why should your business care? This blog post tackles the most frequently asked questions about the EPS program, explaining who it applies to, and the key steps to ensure compliance.
What is the EPS program?
The EPS program establishes GHG emissions performance standards for designated large industrial facilities in Ontario, requiring annual compliance. Under this program, regulated facilities receive an annual ‘baseline’ amount of GHG emissions they are allowed to release, known as the GHG Emissions Limit. These standards will become increasingly stringent over time, compelling facilities to either reduce their emissions or pay a carbon price if they exceed these limits. The EPS program aims to drive GHG reductions while maintaining Ontario’s business competitiveness and preventing carbon leakage. As the GHG Emissions Limit tightens for most emitters and the carbon price rises annually, Ontario emitters are increasingly incentivized to adopt and develop strategies and technologies to reduce their GHG emissions.
How was the Emissions Performance Standard (EPS) program established?
In 2018, the Government of Canada implemented the Greenhouse Gas Pollution Pricing Act (GGPPA), which establishes a backstop carbon pricing framework for all provinces and territories to comply, with the aim of reducing national greenhouse gas (GHG) emissions. The GGPPA comprises of two main parts:
- A regulatory fuel charge
- An Output-Based Pricing System (OBPS) for large industrial emitters
In October 2021, the Government of Ontario enacted regulatory amendments and updates to transition from the federal OBPS to Ontario’s own Emissions Performance Standard (EPS) program. The EPS program sets emissions limits for large industrial facilities in Ontario, intending to align with federal OBPS compliance requirements. As of January 1, 2022, all Ontario facilities previously covered by the OBPS program are transitioned to the EPS program.
It is important to note that even after the Ontario EPS formally replaces the Federal OBPS, the Fuel Charge will continue to function alongside the Ontario regime and will still apply to fuel sales in the province.
How do I know if I need to register for the EPS program?
The EPS program mandates registration for industrial facilities that:
- Emit a minimum of 50,000 tonnes of carbon dioxide equivalent (tCO2e) annually and have been reporting their GHG emissions since 2014.
- Are included as an industrial activity outlined under Schedule 2 of the EPS regulation (i.e. cement, chemicals, electricity generation, metal production, mining).
Smaller facilities emitting between 10,000 and 50,000 tCO2e annually may voluntarily opt in. A facility might choose to opt into the Ontario EPS because they will receive an exemption from the federal fuel charge on the fuel they use. With the fuel charge expected to rise significantly over the next few years, facilities that meet the voluntary participation threshold should evaluate whether it would be more cost-effective to pay the fuel charge or to comply with the obligations of participating in the Ontario EPS.
What are the reporting requirements?
Registered facilities must report their GHG emissions to Ontario’s Ministry of the Environment, Conservation and Parks (MECP) each year on June 1. Facilities that are part of the EPS program also require an accredited third-party to verify their annual reports by September 1.
What are annual emission limits and how are they calculated and applied?
Emissions limits are determined using the GHG Emissions Performance Standards and Methodology for Total Annual Emissions. Different performance standards can be applied based on if facilities generate electricity using fossil fuels, operate a cogeneration unit, or have other specific production parameters. Factors considered include the emissions intensity and historical energy and consumption data. Facilities exceeding their annual emissions limit will be charged a carbon tax.
What can I do to ensure my facility follows the EPS program?
Registered facilities must meet the difference between their verified emissions and annual emissions limits. Facilities can meet compliance through reducing their emissions or submitting compliance instruments. These include excess emissions units, purchasable from the Ontario government, and emissions performance units, which can be traded within the EPS program for up to five years. Units may also be transferred between facilities with proper notice. Facilities must meet their compliance payment by December 15.
What can my facility do to stay ahead of the curve on rising carbon costs and Ontario’s EPS program?
With compliance obligations due annually and the federal carbon price set to increase by $15 a tonne each year, registered facilities need to take the necessary steps to ensure proper compliance with the EPS program. For newly registered facilities, the program offers a three-year exemption from compliance obligations, allowing sufficient time to assess baseline emissions and plan emission reduction strategies. Existing facilities facing significant compliance obligations should also explore emission reduction options. These can be enhancing energy efficiency, adopting renewable energy sources, and implementing innovative technologies to reduce emissions and enhance sustainability.
Easily navigate the EPS program with Blackstone
Our team of policy and energy experts can help you navigate the complexities of the EPS Program and ensure you meet your carbon reporting mandates and compliance obligations on time. Further, Blackstone is highly equipped to help manage, conserve, and implement decarbonization tools to further enhance and integrate cost savings and more efficient energy processes within your operations.
To learn how our team of experts can help your facility comply with Ontario’s carbon regulations, please reach out to us at policyandregulatory@blackstoneenergy.com.
