Overview - Output-Based Pricing System Regulations under the Greenhouse Gas Pollution Pricing Act

Where there are any inconsistencies between this Overview and the Greenhouse Gas Pollution Pricing Act (GGPPA) or Output-Based Pricing System Regulations (OBPS Regulations), the GGPPA or OBPS Regulations shall prevail.

The Output-Based Pricing System Regulations (OBPS Regulations) made under the Greenhouse Gas Pollution Pricing Act (GGPPA) establish the Output-Based Pricing System (OBPS).

The objective of the OBPS is to retain a price on carbon pollution that creates an incentive for emissions-intensive and trade-exposed facilities to reduce their emissions per unit of output, while mitigating the risks of negative effects on competitiveness caused by carbon pricing and carbon leakage, that is, the risk of industrial facilities moving from one jurisdiction to another to avoid paying a price on carbon pollution. The OBPS Regulations Regulatory Impact Analysis Statement provides further information.

Under the OBPS, persons responsible for covered facilities (persons responsible) are required to compensate for greenhouse gas (GHG) emissions that exceed an annual facility emissions limit. In accordance with the GGPPA and OBPS Regulations, the Minister of the Environment (the Minister) will issue surplus credits to persons responsible for covered facilities that emit GHGs in a quantity that is below the facility’s emissions limit. This creates an ongoing financial incentive for facilities to reduce their emission intensity.

This document outlines and highlights the key provisions of the OBPS Regulations. Persons responsible under the OBPS are advised to become familiar with the GGPPA and the OBPS Regulations in their entirety to ensure a full understanding of legal obligations.

Many amendments have been made to the OBPS Regulations since their creation. For the full set of applicable regulatory requirements for each compliance period, please refer directly to the OBPS Regulations and Part 2 of the GGPPA.

Who is subject to the OBPS Regulations

The OBPS Regulations apply to persons responsible, as defined in section 10 of those regulations.

According to section 169 of the GGPPA, covered facilities are those facilities located in provinces listed on Part 2 of Schedule 1 to the GGPPA that meet the criteria listed in section 8 of the OBPS Regulations. Specifically:

Covered facilities are also those that have been designated (“opt-in”) as a covered facility under section 172 of the GGPPA. For more information on “opting-in”, refer to the Policy Regarding Voluntary Participation in the Output-Based Pricing System.

What are compliance periods

A compliance period is a period of time, generally a calendar year, to which quantification, reporting and compensation obligations relate. A compliance period would generally start on January 1 of a given year and generally end on December 31 of that year.

In the case of a facility that is located in a province whose name is listed in Part 1 of Schedule 1 to the GGPPA, the first compliance period for facilities that become covered facilities during a given calendar year begins on the effective date of registration as an emitter with the Canada Revenue Agency (CRA).

In the case of a facility that is located in a province whose name is not listed in Part 1 of Schedule 1 to the GGPPA, the compliance period for facilities that become covered facilities during a given calendar year begins on the date of registration that is specified on the covered facility certificate issued under subsection 171(2) of the GGPPA.

For more information about compliance periods, refer to section 9 of the OBPS Regulations.

What is the facility GHG emissions limit

The GHG emissions limit for a covered facility must be determined in accordance with sections 36 to 43 of the OBPS Regulations for each compliance period. The GHG emissions limit is based on the facility’s production from specified industrial activities, as defined under subsection 2(1) of the OBPS Regulations, and the output-based standard applicable to those activities.

Column 3 of Schedule 1 identifies the output-based standards for many of the industrial activities listed in that schedule and specifies the industrial activities for which the output-based standard must be calculated in accordance with sections 37 to 40 of the OBPS Regulations. An output-based standard will also need to be calculated by covered facilities where an industrial activity that is not listed in Schedule 1 to the OBPS Regulations is carried out.

How are GHGs quantified

The quantity of GHGs that are emitted from a covered facility during a compliance period must be determined in accordance with section 35 of the OBPS Regulations. The total quantity of GHGs from a covered facility is determined, where applicable, as per sections 16 to 25 of the OBPS Regulations. The Quantification Guidance may be used as a reference guide to quantify GHGs.

Persons responsible must quantify all GHGs from the covered facility from all the specified emission types identified in subsection 5(1) of the OBPS Regulations:

In accordance with sections 26 to 30 of the OBPS Regulations, persons responsible may apply for a permit to use an alternative GHG quantification method or guideline for quantifying emissions. Schedule 4 to the OBPS Regulations sets out the information required to make an application. Any permit issued by the Minister is valid for up to 24 months and may be renewed once.

For covered facilities that generate electricity from fossil fuels as an additional activity, the quantity of GHGs from that activity are quantified, as per section 18 of the OBPS Regulations, in accordance with the requirements of the part of Schedule 3 to the OBPS Regulations that is applicable to any other industrial activity engaged in at the facility.

How is production to be quantified

Production for each specified industrial activity, as defined under subsection 2(1) of the OBPS Regulations, must be quantified for each compliance period in accordance with sections 16, 31 and 32 of the OBPS Regulations, as well as Schedule 3 to the OBPS Regulations. Column 2 of Schedule 1 to the OBPS Regulations sets out the unit for measuring the production resulting from industrial activities listed in that Schedule. For activities not listed in Schedule 1 to the OBPS Regulations, production must be quantified in the unit of measurement identified in the request made under subsection 172(1) of the GGPPA.

For covered facilities that generate electricity from fossil fuels as an additional activity, the quantity of gross electricity generated must be quantified in gigawatt hours (GWh), in whole or in part, in accordance with paragraph 31(1)(b) and sections 6 and 7 of Part 38 of Schedule 3 to the OBPS Regulations.

The additional content referred to in section 12 of the OBPS Regulations must be quantified, specifically the sales and purchases of thermal energy, the production and sales of hydrogen gas and the production of gypsum products. Refer to section 12 of the OBPS Regulations for more information.

What are the reporting and verification requirements and deadlines

Section 173 of the GGPPA requires persons responsible to submit a report to the Minister for each compliance period that sets out information specified in the OBPS Regulations.

Each annual report must include the information outlined in sections 11 and 12 of the OBPS Regulations and Schedule 2 to the OBPS Regulations. Annual reports must also be accompanied by a verification report. Verification requirements, including the use of an accredited verification body and the content of the verification report, are found in sections 49 to 52 of the OBPS Regulations and Schedule 5 to the OBPS Regulations. Information on verification can also be found in Annex I to this document.

Section 13 of the OBPS Regulations states that an annual report, along with a verification report, must be submitted by June 1 of the year following the compliance period for which the annual report is prepared.

Pursuant to subsection 53(1) of the OBPS Regulations, the Minister may intervene in certain circumstances to establish the emissions limit or determine the GHGs emitted from the covered facility, specifically:

For further information on material discrepancy, refer to the document “Guidance on Third-Party Verification Under the Output-Based Pricing System Regulations.”

Subsection 53(2) of the OBPS Regulations outlines the sources of information for the Minister to use in establishing the emissions limit or determining the quantity of GHGs emitted from the covered facility for the compliance period.

How do I receive surplus credits or remit compensation

In accordance with section 44 of the OBPS Regulations, the person responsible must assess the quantity of GHGs emitted during the applicable compliance period, as determined under section 35 of the OBPS Regulations, against its applicable GHG emissions limit, determined in accordance with sections 36, 36.1, 36.2, 41, 41.1, 41.2 or 42 of the OBPS Regulations.

As per section 175 of the GGPPA and section 59 of the OBPS Regulations, the person responsible will receive surplus credits when the result of the assessment under section 44 of those Regulations is negative for the quantity of GHGs calculated in that assessment. Surplus credits will be issued if the emissions limit has been calculated in accordance with the OBPS Regulations, unless:

As per section 174 of the GGPPA and sections 54 to 58, 70 and 71 of the OBPS Regulations, when the result of the assessment under section 44 of those Regulations is positive, the person responsible must provide compensation for each CO2e tonne emitted above the GHG emissions limit.

The methods for providing compensation are one of the following or a combination of both:

  1. making an excess emissions charge payment electronically to the Receiver General for Canada; and
  2. remitting compliance units, namely surplus credits, offset credits, or recognized units (for certain provincial offset credits).

The Government of Canada’s Credit and Tracking System (CATS) tracks compliance obligations, credit issuance and transfers, and remittance of compliance units and excess emissions charge payments under the OBPS.  Refer to the Output-Based Pricing System web page, for further information about CATS.

ECCC is developing a federal GHG Offset System to encourage cost-effective domestic GHG emissions reductions from activities not covered by carbon pollution pricing. Information on the development and implementation of this system can be found on the ECCC web page.

A recognized unit is a unit or credit issued by a province or by a program authority under a GHG offset protocol and an offset program on the List of Recognized Offset Programs and Protocols for the Federal OBPS, as per subsection 78(1), and that meets the eligibility requirements in subsection 78(4) of the OBPS Regulations. For more information regarding the remittance of recognized units, please see the List of Recognized Offset Programs and Protocols for the Federal OBPS.

Section 181 of the GGPPA and sections 72 to 75 of the OBPS Regulations identify the circumstances under which compliance units may be suspended, revoked or require replacement, as well as the requirements for doing so.

Note also that amendments have been made to sections 70, 72 and 73 of the OBPS Regulations. There is a limit on the use of eligible surplus credits for the 2021, 2022 and subsequent compliance periods. Specifically, as of January 1, 2022, only surplus credits issued in respect of a facility located in a province that was listed in Part 2 of Schedule 1 to the GGPPA for at least one day during the compliance period for which they are being remitted are eligible to be remitted.

With the removal of New Brunswick from Part 2 of Schedule 1 to the GGPPA on January 1, 2021, and Ontario on January 1, 2022, surplus credits issued in respect of facilities located in those provinces may be remitted as follows:

Starting on January 1, 2022, the Minister has the authority to suspend surplus credits issued to a facility in a province or territory no longer listed in Part 2 of Schedule 1 to the GGPPA and that are still in the account associated with a facility located in a delisted province. This would have the effect of making surplus credits ineligible for transfer or remittance. The suspension of surplus credits will generally only be considered for suspension once the increased-rate compensation deadline for that compliance period has passed.

Should such a suspension of surplus credits occur, it could be lifted by the Minister when those surplus credits are to be used by the facility to meet a compensation obligation for a compliance period in which the province or territory in which the facility is located was listed in Part 2 of Schedule 1, provided that the surplus credits are still eligible for use.

What are the compensation deadlines and rates

According to subsection 57(1) of the OBPS Regulations, the regular-rate (1:1) compensation deadline is December 15 of the calendar year in which the related annual report must be submitted. If compensation is provided on or before December 15 of the year in which the annual report for a compliance period must be submitted, and as provided under subsection 174(3) of the GGPPA, compensation due per CO2e tonne of excess emissions is one compliance unit, or the excess emission charge rate applicable to the compliance period (excess emission charge is set out in column 2 of Schedule 4 to the GGPPA).

Subsection 57(2) of the OBPS Regulations states that the increased-rate (4:1) compensation deadline is February 15 of the calendar year following the deadline under subsection 57(1). If the compensation is provided after December 15 of the year in which the annual report is submitted, the compensation due for each tonne of excess CO2e emissions is four compliance units or four times the excess emissions charge rate applicable to the compliance period, as required under subsection 174(4) of the GGPPA.

OBPS deadlines by compliance period
Compliance Period Annual Report and Verification Report Submission Deadline Regular-Rate (1:1) Compensation Deadline Increased-Rate (4:1) Compensation Deadline
2020 June 1, 2021 December 15, 2021 February 15, 2022
2021 June 1, 2022 December 15, 2022 February 15, 2023
2022 June 1, 2023 December 15, 2023 February 15, 2024

How do new covered facilities need to comply with the OBPS Regulations

Certain requirements of the OBPS Regulations do not apply to certain covered facilities that have not completed two calendar years of production following the date of first production. Please refer to subsection 11(2), section 43 and subsections 44(2) to (5) of the OBPS Regulations for more information.

What are the notification and record-keeping requirements

Under section 48 of the OBPS Regulations, the Minister must be notified in writing within 30 days of change, specifically if there is a change regarding:

  1. the administrative information set out in sections 1 and 2 of Schedules 2 and 5 and provided under the OBPS Regulations, such as a change of person responsible;
  2. the facility’s perimeter;
  3. the information provided in an application for registration under subsection 171(1) of the GGPPA or in a request for designation under subsection 172(1) of the GGPPA, such as a change regarding the activities engaged in at the facility; or
  4. the information provided in the application for a permit under section 27, if the permit is still valid.

Notification can be provided to the Minister by completing a Notice of Change in the OBPS Registration module in the Single Window System (SWIM). Please refer to the Steps to Submitting Your Output-Based Pricing System Registration Application for information on how to complete a Notice of Change, or contact the Operations Office at the number provided below, under “How can I learn more?” section.

Section 187 of the GGPPA and sections 45 and 47 of the OBPS Regulations set out the requirements for record-keeping and retention of record and other documents. Records must be kept within 30 days after the date on which the information becomes available. All records must be retained at the principal place of business in Canada by the person responsible. If the records are moved, the Minister must be notified in writing, within 30 days, of the new location in Canada where they can be inspected. As per subsection 187(5) of the GGPPA, records must be retained for seven years after the year to which they relate.

What if errors or omissions are found in my previous annual reports

If, within five years after submitting an annual report for a compliance period, a person responsible becomes aware of an error or omission in the report, the person must notify the Minister in writing as soon as possible, in accordance with section 176 of the GGPPA. A person responsible can notify the Minister through the Notice of error or omission function in the Reporting module in SWIM.

In addition, if, within five years after a report has been submitted for a compliance period, the Minister is of the opinion that there is an error or omission in the report, the Minister may require the person responsible to submit a corrected report and may require that the report be verified by a third party, in accordance with section 177 of the GGPPA. Corrected reports and verification reports must meet the requirements set out in the OBPS Regulations. Subsection 62(2) of the OBPS Regulations sets out the information to be included in the corrected report, and section 52 of the OBPS Regulations and Schedule 5 to the OBPS Regulations set out the contents of the verification report.

Section 178 of the GGPPA and sections 64 to 69 of the OBPS Regulations set out the requirements when a corrected report results in a change to the compensation to be provided or surplus credits to be issued. The change in obligation or credits will be reflected in CATS.

For each error or omission, remember to refer to the OBPS Regulations version that was in force during the compliance period for which the corrected report is submitted. For example, if you need to correct an error in an annual report for the 2019 compliance period, keep in mind the transitional provisions rules for alternative GHG quantification methods in section 80, for record-keeping in section 81 and for specific industrial activities in sections 79 and 82 to 85.1 (Greenhouse Gas Emissions Information Production Order, SOR/2018-214). Please see the 2019 Quantification Guidance for more information on the transitional rules.

What if my facility ceases to be a covered facility

There are a number of circumstances under which a facility may cease to be a covered facility. First, as stated in section 6 of the OBPS Regulations, the Minister may cancel the designation of a covered facility that was designated on the condition that it would emit at least 10 kt of CO2e in any of the three calendar years following the date of first production, if the covered facility has not met that condition as of December 31 of the third calendar year following that date. The Minister must provide notice of their intention to cancel the covered facility’s designation to the person responsible for the covered facility at least 30 days before cancelling the designation.

Section 7 of the OBPS Regulations sets out the date on which a facility ceases to be a covered facility under certain circumstances:

Other circumstances are set out in the Policy Regarding Voluntary Participation in the Output-Based Pricing System. Please note that a facility ceases to be covered facility when the province in which it is located is removed from Part 2 of Schedule 1 to the GGPPA.

In addition, if a facility ceases to be a covered facility for any reason, the person responsible for that facility is responsible for meeting the obligations set out in section 10.1 of the OBPS Regulations in respect of the compliance periods during which the facility was a covered facility. For example, the person responsible must provide the compensation for the compliance periods during which the facility was a covered facility.

Confidentiality requests

As per section 254 of the GGPPA, a person that provides information to the Minister under Part 2 of the GGPPA may submit with the information a written request, with supporting justifications, that the information be treated as confidential.

As a matter of practice, ECCC will not proactively disclose facility level annual production and emissions intensity values collected under the GGPPA, that are not already available to the public, subject to provisions of the Access to Information Act (ATIA). Prior to any disclosure under the ATIA, ECCC would consider all relevant exemptions in the ATIA, including subsection 20(1), which aims to protect third party information. If ECCC proposes to disclose information under the ATIA that contains or might contain information described in subsection 20(1) of ATIA, ECCC will give the third party written notice and an opportunity to provide written representations to ECCC in accordance with section 27 and 28 of the ATIA. If ECCC intends to claim an exemption for third party information pursuant to subsection 20(1) of ATIA, the requirement for third party notification under sections 27 and 28 will not apply.

How can I learn more

Please go to the OBPS web page for more information on the GGPPA, OBPS Regulations, and related policies and guidance. For questions or comments on the federal OBPS please email the Carbon Markets Bureau Operations Office at stfr-obps@ec.gc.ca or call 1-833-849-9160.

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