Use of proceeds from the federal Output-Based Pricing System


Pricing carbon pollution is a key part of Canada’s clean growth and climate plan, and is the most efficient and least-cost way to reduce climate pollution while driving innovation. In order to ensure there is a price on carbon pollution across Canada, the Government of Canada has developed a carbon pollution pricing system that applies in provinces and territories that have requested it or that have not developed their own pricing systems that meet federal stringency requirements. The federal system has two parts: a regulatory charge on fuel, and a performance-based system for industry, known as the Output-Based Pricing System (OBPS).

The federal carbon pollution pricing system is not about raising revenues. It is about recognizing that pollution has a cost, empowering Canadians, and encouraging cleaner growth and a more sustainable future. Around the world, governments use proceeds from pricing carbon pollution for various purposes, including reducing business or individual taxes, helping businesses and households invest in energy efficiency, building transit and other infrastructure, and offsetting costs incurred by low-income households or other vulnerable groups. Research has shown that using proceeds in these ways does not counteract the carbon price, but in fact can make it more effective and equitable by driving additional emission reductions and limiting unintended impacts.

The Government will return all direct proceeds from the federal system to the province or territory where they were collected:

How the Output-Based Pricing System works

The OBPS encourages industrial facilities to reduce their greenhouse gas emissions, while maintaining their competitiveness and avoiding carbon leakage.Footnote 1 Under the OBPS, industrial facilities pay on their emissions that exceed a set level. Facilities that emit less than the level earn surplus credits they can bank or sell.

Facilities with emissions above the set level have the following options:

These flexible compliance options help reduce overall costs and encourage emission reductions across sectors. However, this flexibility also makes it difficult to predict the amount of proceeds that will ultimately be generated under the OBPS, since the government does not know which of the options each facility will choose.

The OBPS took effect in Ontario, New Brunswick, Manitoba, Prince Edward Island, and Saskatchewan on January 1, 2019. Facilities in the system are currently tracking their emissions and production, but will not report or pay until mid-2020. The actual amount of proceeds available to be invested from pricing in 2019 will thus not be known until late 2020.

Support for reducing emissions from industry

The Government of Canada supports industries across the country as they work to improve their efficiency and productivity, reduce their emissions, save money, and grow. Some of the programs that support emission reductions from industry include:

Providing input

Interested parties are invited to provide written comments by email, on or before August 30, 2019 at: The following questions are intended to help guide input.

Related material

Returning fuel charge proceeds

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