Canada launches new fund to reinvest proceeds from carbon pollution pricing system and reduce industrial greenhouse gas emissions
February 14, 2022 – Gatineau, Quebec
A healthy environment, good jobs, and a growing economy. In the fight against climate change, the Government of Canada is committed to supporting workers, while building a strong, resilient economy for everyone. Key to this plan is Canada’s price on carbon pollution.
Today, the Minister of Environment and Climate Change, the Honourable Steven Guilbeault, launched the Output-Based Pricing System Proceeds Fund, a new program to support industrial initiatives that reduce greenhouse gas (GHG) emissions and deploy clean technology and green energy.
The program will use the proceeds of Canada’s carbon pollution pricing system for heavy industry—collected in Manitoba, New Brunswick, Ontario, and Saskatchewan—to support low carbon technology projects in those provinces. Approximately $161 million from the 2019 compliance period will go towards projects that reduce carbon pollution.
The Output-Based Pricing System Proceeds Fund has two program streams:
The Decarbonization Incentive Program
The Decarbonization Incentive Program (DIP) is a merit-based program to support clean technology projects that will help decarbonize industrial sectors over the long term and reduce GHG emissions. The amount of funding available through the DIP for each province varies depending on the carbon pricing proceeds collected from facilities in each respective province where the federal OBPS currently applies or applied in the past. The DIP is currently accepting applications for project funding to return OBPS proceeds collected in the 2019 compliance period.
The Future Electricity Fund
The Future Electricity Fund (FEF) will support clean electricity projects and/or programs. Proceeds collected from electricity generating facilities covered by the OBPS (such as utilities) will be returned through funding agreements with governments of jurisdictions where the federal carbon pollution pricing system currently applies or applied in the past.
To mark the launch of the new program, Minister Guilbeault and Viviane Lapointe, Member of Parliament for Sudbury, participated in virtual tours of Vale Mining’s operations in Sudbury Ontario, and NOVA Chemicals, to see first-hand their latest initiatives to reduce operating emissions.
“A healthy environment and a healthy economy go together. The Government of Canada is reinvesting all direct proceeds from the federal carbon pollution pricing system right back to the provinces of origin, as promised. This new Output-Based Pricing System Proceeds Fund will cut pollution, support workers, and keep us on track to reach our emission reduction goals.”
– The Honourable Steven Guilbeault, Minister of Environment and Climate Change
“Since the 1970’s, Sudbury has seen an environmental revival, as a result of our vital industries rising to the challenges and incentives that come with forward-thinking government policy, regulation and investment. Sudbury and Canada are recognized global leaders in responsible and sustainable mining. The world needs more Canada, and we will continue to bring this expertise to the world.”
– Viviane Lapointe, Member of Parliament for Sudbury
The OBPS is the regulatory trading system for industry under Canada’s carbon pollution pricing system. The federal OBPS is designed to ensure there is a price incentive for industrial emitters to reduce their GHG emissions and spur innovation. It helps to maintain competitiveness for industries that compete internationally by protecting against the risk of industrial facilities moving from one jurisdiction to another to avoid paying a price on carbon pollution (known as “carbon leakage”).
The OBPS sets performance standards for a wide range of industrial products. Each industrial facility receives an emissions limit calculated based on the relevant standards and its level of production. Facilities that emit above their limit have to pay. Those below their limit get credits they can sell or save to use later. This creates a financial incentive for the least efficient facilities to reduce their emissions per unit of output, and for strong performers to continue to improve.
The Government of Canada committed to return proceeds collected from the OBPS to jurisdictions of origin. Provinces and territories that have voluntarily adopted the federal OBPS can opt for a direct transfer of proceeds collected. Proceeds collected in non voluntary jurisdictions (Manitoba, New Brunswick, Ontario, and Saskatchewan) will be returned through the two program streams of the OBPS Proceeds Fund.
The Future Electricity Fund is funded by proceeds collected from electricity generating facilities covered by the OBPS. This funding stream will advance Canada’s GHG emissions reduction targets by supporting the production and delivery of clean electricity as well as its efficient use.
The Decarbonization Incentive Program is funded by proceeds collected from all other sectors that are covered by the federal OBPS. Specifically, it will aim to incentivize long term decarbonization of Canada’s industrial sectors by supporting the deployment of clean technology projects to further reduce GHG emissions.
In provinces and territories where the federal carbon pollution pricing system applies, all direct proceeds are returned to individuals, communities, and businesses in that jurisdiction.
The federal carbon pollution pricing system has two components: the OBPS (carbon pricing for industry), and the federal fuel charge. In jurisdictions where fuel charge proceeds are returned directly, approximately 90% of the proceeds go back to households, with the majority of families receiving more money back than they pay.
The Government of Canada has updated the criteria that all pricing systems in Canada must meet (known as the benchmark) for 2023–2030. The updated benchmark includes the updated price trajectory that reaches $170 per tonne in 2030, one of the most robust in the world, which will drive significant emissions reductions.
The Government is currently reviewing the federal OBPS. A key change being proposed is the addition of an annual tightening rate on performance standards. Consultations closed January 24, and proposed federal regulations will be published in the first half of this year, with final regulations coming into force next January.
Office of the Minister of Environment and Climate Change
Environment and Climate Change Canada
819-938-3338 or 1-844-836-7799 (toll-free)
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