Carbon pollution pricing for industry

Canada’s approach to industrial pollution pricing ensures big polluters have a strong financial incentive to reduce their carbon pollution. It also helps promote innovation and attract new clean technology projects that are creating good paying jobs.

The approach gives major heavy industries certainty on the price of the carbon pollution they generate. This helps them make informed decisions on reinvesting in cleaner operations. It is also designed to protect against the risk of industries shifting production from one region to another to avoid paying a price on carbon pollution (known as "carbon leakage").

Industrial system by region

Provinces and territories can choose the carbon pollution pricing system that fits their situation best as long as it meets the minimum national standards, known as the federal 'benchmark'.

If a province or territory decides not to have a price on pollution or proposes a system that does not meet these standards, the federal system is put in place. 

The federal carbon pricing system for industry currently applies in: 

• Manitoba
• Nunavut
• Prince Edward Island
• Yukon

All other provinces and territories operate their own carbon pollution pricing system for industry that meet the federal benchmark.

The federal industrial pricing system 

The federal system for industrial carbon pollution pricing is known as the Output-Based Pricing System (OBPS).

The Output-Based Pricing System sets a regulatory performance standard for each sector or activity under the system.

• Facilities that are less efficient than the standard have to pay
• Facilities that perform better than the standard 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 carbon emissions.

For more information on how the system works, visit Output-Based Pricing System.

The federal industrial pricing system: Where the money goes

The money (proceeds) from the federal carbon pricing system for industry is returned to the province or territory where it was collected. Some provinces have moved from the federal industrial pricing system to their own industrial pollution pricing system. In these cases, the money previously collected is still returned.

For Yukon and Nunavut, the money is returned directly to their territorial governments.

In other regions where the federal pricing system for industry applies or applied in the past, the money is returned through a fund, known as Output-Based Pricing System (OBPS) Proceeds Fund. All money collected from industrial pollution pricing is returned back to local economies to help reduce emissions. This money will help industries improve energy efficiency, use sustainable solutions, and lower their carbon footprint as we work toward a low-carbon future.

The fund has 2 streams: the Decarbonization Incentive Program and the Future Electricity Fund.

Decarbonization Incentive Program

The program helps industries transition to lower or non-carbon operations in the long term.  

Future Electricity Fund 

The fund supports large-scale clean electricity initiatives that will advance regional energy priorities, such as reducing electricity demands, improving electrical infrastructure reliability, and promoting clean electricity technologies.

Funded projects 

Discover some projects funded by the federal carbon pricing system for industry.

• Pollution pricing at work: re-investing $2.2 million into new low-carbon cement in Ontario
• Canada cuts carbon pollution with funding for Glencore Canada Corporation project
• Helping New Brunswickers reduce energy costs, cut pollution
• Government of Canada supporting Ontario universities with funding to reduce pollution to achieve environmental success
• Canada sparks progress on clean electricity with federal funding in Saskatchewan