How the price on pollution works for industry
Pricing pollution is a central part of Canada’s plan to fight climate change and grow the economy. By pricing pollution, we will
- reduce emissions;
- spur innovation; and
- help Canadian companies compete in the emerging global clean economy.
For industries in provinces and territories where the federal system applies, Canada has an output-based pricing system (OBPS) to price carbon pollution from industrial emitters. The OBPS encourages industries to innovate and be more efficient. It ensures industries pay their fair share while maintaining international competitiveness.
When pollution is free there will be more of it.
That’s why we’re putting a price on carbon pollution for big industry, while also protecting jobs and growing the economy.
Here’s how our price on carbon pollution for big industry works.
The government sets an ambitious standard for large industrial sectors.
Businesses that pollute more than the standard have to pay. While businesses that find ways to pollute less, earn credits that they can sell to the bigger polluters.
It’s a system that is already at work in many provinces, Europe and California.
And the result is a cleaner, more innovative and more competitive Canada.
Canada’s climate plan: Good for the environment, good for the economy, and good for middle-class families.
How the output-based pricing system works
The OBPS sets a performance standard for each sector under the system.
Facilities that are less efficient than the standard have to pay. Those that perform better than the standard will earn credits that they can sell, or save for future use. The amount each facility pays depends on how much carbon pollution it emits to make one unit of product.
If a facility finds a way to pollute less per unit, it will save money or earn credits. This creates a financial incentive for continuous reduction of emissions.
How the output-based pricing system reduces carbon pollution
The OBPS creates a financial incentive for the least efficient facilities to reduce emissions per unit of output and for strong performers to continue to improve.
Although only large emitters are required to join the OBPS, some additional facilities can opt in to take advantage of the benefits from the system. Find out how facilities can opt into the OBPS.
The intent is to return all proceeds generated through the OBPS to the province or territory in which they were collected to help further reduce greenhouse gas emissions.
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