Proposal for the Output-Based Pricing System Regulations: chapter 13

Section 174 of the Act provides that “a person that is responsible for a covered facility that emits greenhouse gases in a quantity that exceeds the emissions limit that applies to the covered facility during a compliance period must, in accordance with the regulations, provide compensation for the excess emissions by the increased-rate compensation deadline.” The responsible person for a covered facility will have the following options to meet its compensation obligation if emissions exceed the emissions limit:

1. payment of the excess emissions charge to the Receiver General of Canada, set at the same rate as the fuel charge
   1. $20 per tonne of CO₂e owed for the 2019 compliance period, increasing by $10 per tonne of CO₂e each year to $50 per tonne of CO₂e for the 2022 compliance period and beyond unless specified;
2. remittance of surplus credits issued by the Minister;
3. remittance of offset credits issued by the Minister, if enabled through regulations;
4. remittance of recognized units (i.e. eligible offset credits from provincial offset systems); or
5. a combination of the above four compliance options.

Part 2 of the Act provides for two compensation deadlines: the regular-rate compensation deadline and the increased-rate compensation deadline.

Subsection 174(3) of the Act indicates that if a person provides compensation for excess emissions of the facility by the regular-rate compensation deadline, the following rate applies:

• one compliance unit for each tonne of CO₂e;
• the excess emissions charge for the calendar year in which the compliance period falls, for each tonne of CO₂e.

If the person provides compensation for excess emissions of the facility after the regular rate compensation deadline, subsection 174(4) of the Act provides that the applicable rate is equal to four times the regular rate. Ultimately, subsection 174(1) of the Act requires that compensation must be provided by the increased-rate compensation deadline.

The regulations will specify rules with respect to compensation, and the regular-rate and increased-rate deadlines.

Compensation amount

20. (1) For a compliance period in which a facility’s net GHG emissions are above its emissions limit, as calculated under subsection 19(1), the compensation obligation is equal to the difference between the two values.

Compensation deadline

(2) The person responsible for a covered facility that has GHG emissions above their emissions limit for a compliance period must submit the compensation for the excess emissions in full by the increased-rate compensation deadline.

Deadlines – regular compensation

(3) For the purpose of section 169 of the Act, the regular-rate compensation deadline is December 15 of the year following the compliance period for which compensation for excess emissions of the covered facility is being made.

Deadline – increased compensation

(4) For the purpose of section 169 of the Act, the increased-rate compensation deadline is February 15 of the second year following the compliance period for which compensation for excess emissions of the covered facility is being made.

Remittance of surplus and offset credits

21. (1) A person responsible for a covered facility that provides compensation under section 174 or 178 of the Act by remitting surplus credits or offset credits—or a combination of the two types of credits—must remit those credits using the tracking system referred to under section 185 of the Act.

Remittance of recognized units

(2) A person responsible for a covered facility that provides compensation under section 174 or 178 of the Act by remitting a recognized compliance unit must retire the unit in the other jurisdiction’s tracking system in a manner that ensures the provision of full credit information to the Minister—and any other information the Minister may require—such that the Minister may confirm the unit’s eligibility for compensation.

Limitation on use of compliance units

(3) Beginning with the 2021 compliance period and when providing compensation under section 174 of the Act, a person responsible for a covered facility may remit compliance units to compensate for only up to 75% of the facility’s excess emissions.

Payment of the excess emissions charge

(4) A person responsible for a covered facility that provides compensation in accordance with section 174 or 178 of the Act by paying the excess emissions charge must make the electronic payment to the Receiver General for Canada.

Submission of proof of payment

(5) A person responsible for a covered facility must submit to the Minister the proof of the payment required under subsection (4) within 10 business days of receiving that proof from the Canada Revenue Agency.

Compensation

22. (1) A person responsible for a covered facility must submit to the Minister information with respect to how compensation was provided within 10 business days of providing compensation for the excess emissions in full for the covered facility.

Compensation information required

(2) The information referred to in subsection (1) must include:

1. facility identification information, including the covered facility certificate number;
2. the section of the Act under which the compensation was provided;
3. the compliance period for which compensation was provided for compensation under section 174 of the act;
4. total excess GHG emissions, in tonnes of CO₂e, and breakdown of compensation provided by type (surplus credit, offset credit, recognized unit, excess charge payment);
5. if applicable, the emissions charge payment details, including:
   1. the total dollar-amount of emissions charge paid to the Receiver General of Canada,
   2. the applicable rate of the emissions charge,
   3. the date of payment to the Receiver General of Canada, and
   4. Canada Revenue Agency Business Number;
6. if applicable, the details for surplus credits and offset credits remitted for compensation, including:
   1. the total number of surplus credits, and of offset credits, remitted,
   2. the date of the remission transaction,
   3. the transaction number,
   4. the serial numbers of surplus credits and offset credits retired,
   5. the date or dates of the surplus credits and offset credits were issued; and
7. if applicable, the retirement details for recognized units, including:
   1. the total number of recognized units remitted,
   2. the registry where the recognized units were remitted,
   3. the date of transaction,
   4. the transaction number,
   5. the serial numbers of the recognized units,
   6. the start date of the offset project,
   7. the year in which GHG reductions or removals are attributed,
   8. the offset protocol used, including version number and publication date, and
   9. name of the accredited verification body that verified the credits.

Priority of compensation

23. Compensation for the excess emissions provided by a person responsible for a covered facility will be applied against the facility’s excess emissions in the following order of priority:

1. excess emissions charge paid to the Receiver General for Canada;
2. recognized units that are retired by another jurisdiction;
3. surplus credits remitted to the Minister in the compliance tracking system, starting with the oldest; and
4. offset credits issued by the Minister and made available for remittance in the compliance tracking system, starting with the oldest.