Ontario is consulting on a proposed Emissions Performance Standards (EPS) for the industrial sector, intended as an alternative to the federal government’s Output-Based Pricing System (OBPS) (federal backstop) for electricity and industrial sectors under Part 2 of the Greenhouse Gas Pollution Pricing Act (GGPPA).

The federal backstop applies to any province or territory that does not have a carbon pricing system that meets the federal benchmark. On October 19, 2018, Ontario was added to Part 2 of Schedule I for the OBPS under the GGPPA.

The  government intends to refine its EPS proposal through consultation with stakeholders and says that it will work with the federal government to remove Ontario from Part 2 of Schedule I while Ontario’s constitutional challenge regarding the GGPPA is pending in the courts.

The EPS is designed to establish greenhouse gas (GHG) emissions performance standards for industrial facilities, intended to secure reductions in GHG emissions intensity from large emitters (contrast the overall reductions required by cap and trade systems), while maintaining competitiveness of Ontario businesses and minimizing carbon leakage.

Any industries that do not meet the standards will have to pay. However, the proposal envisages that they may achieve compliance by purchasing compliance units, awarded to companies that reduce emissions below their targets. Although couched in other terms, this appears to be intended to operate as an emissions trading scheme based on emissions intensity.

The  Ontario government notes that is still  actively challenging the federal backstop as an unconstitutional disguised tax, in two reference proceedings. On November 30, 2018, Ontario filed its factum with the Ontario Court of Appeal questioning the constitutionality of the federal GGPPA. On January 25, 2019, Ontario filed a similar factum with the Saskatchewan Court of Appeal in the parallel legal proceeding occurring here.

To read the full EPS proposal on the Environmental Registry of Ontario, please click here

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