OBPS credits

Credit Solutions for Canada’s Output-Based Pricing System

The Output-Based Pricing System (OBPS) is a regulatory framework established under the federal Greenhouse Gas Pollution Pricing Act in Canada. It is implemented at the federal level in Canada, but operates in provinces and territories that do not have their own equivalent carbon pricing system. The federal government oversees the OBPS, ensuring that it aligns with national climate goals and regulatory standards. It is designed to limit GHG emissions from industrial facilities while minimizing the economic impact on businesses that are emissions-intensive and trade-exposed (EITE).

OBPS credits are earned by facilities that emit less than the sector-specific performance standard and these credits can then be traded, allowing for cost-effective compliance with emission regulations. At Targray, we offer expert guidance and tailored solutions for businesses navigating the complexities of the OBPS by helping participants maximize OBPS credit potential and ensure seamless adherence to regulatory standards. Contact our Environmental Commodities team to learn about our innovative solutions for OBPS credits.

 

Introduction

Canada’s Output-Based Pricing System (OBPS) sets emissions intensity benchmarks for large industrial facilities, requiring them to pay for emissions that exceed these benchmarks while earning credits for emissions below the benchmarks. This system is designed to reduce greenhouse gas emissions while minimizing economic impacts and competitiveness issues for key industries.

Scope and Applicability

The system applies to industrial facilities emitting 50,000 tonnes of CO2 equivalent per year or more. Facilities emitting between 10,000 and 50,000 tonnes can voluntarily opt into the system.

Industry-specific benchmarks are set, typically based on the performance of the most efficient facilities.

What are OBPS Credits?

Facilities emitting less than the benchmark earn surplus credits, which they can sell or bank for future use. Those emitting more than the benchmark must submit compliance units (credits or payments).

  • Earning Credits: Facilities that emit fewer greenhouse gases than their allocated benchmark earn surplus credits. These credits represent a ton of CO2 equivalent emissions reduced below the benchmark level.
  • Using Credits: Facilities can use these credits to offset future emissions that exceed their benchmarks. This provides flexibility in managing their compliance obligations over time.
  • Trading Credits: Surplus credits can be traded between facilities, creating a market for emissions reductions. This allows facilities that are more efficient in reducing emissions to sell their excess credits to those facing higher reduction costs.
  • Compliance Obligations: Facilities must submit credits for any emissions that exceed their benchmarks. They can use surplus credits they have earned, purchase credits from other facilities, or pay a carbon price to meet their compliance obligations.
  • Monitoring and Reporting: Accurate monitoring and reporting of emissions are crucial. Facilities need to adhere to the reporting guidelines set by Environment and Climate Change Canada to ensure they correctly track their emissions and credit balances.
  • Strategic Planning: Facilities should incorporate the OBPS into their strategic planning, considering how they can reduce emissions, optimize the use of credits, and manage potential costs associated with exceeding benchmarks.

Staying informed about regulatory updates and changes to benchmarks or credit policies is essential. This ensures that facilities remain compliant and can take advantage of any new opportunities or changes in the system.

 

OBPS in Different Provinces and Territories

The implementation of the OBPS varies across provinces and territories, reflecting regional preferences and policies. Here’s a breakdown:

Federal OBPS

Applies in: Ontario, Manitoba, New Brunswick, Prince Edward Island, Yukon, and Nunavut.

Program Name: Federal Output-Based Pricing System (OBPS)

  • Administration: Environment and Climate Change Canada (ECCC)
  • Benchmarks: Industry-specific benchmarks based on national standards.
  • Allowances/Credits: Facilities earn surplus credits for emissions below the benchmark and must submit compliance units for emissions above the benchmark.

Alberta

Program Name: Technology Innovation and Emissions Reduction (TIER) system

  • Administration: Alberta Environment and Parks
  • Benchmarks: Industry-specific benchmarks, typically set at the top quartile of performance within the sector.
  • Allowances/Credits: Facilities earn Emission Performance Credits (EPCs) for emissions below the benchmark and must submit TIER Fund Credits or EPCs for emissions above the benchmark.

British Columbia

Program Name: Carbon Tax (no separate OBPS, covered by the carbon tax system)

  • Administration: British Columbia Ministry of Finance
  • Benchmarks: Not applicable (covered under carbon tax).
  • Allowances/Credits: Not applicable.

Saskatchewan

Program Name: Saskatchewan Output-Based Performance Standards (OBPS)

  • Administration: Saskatchewan Ministry of Environment
  • Benchmarks: Sector-specific performance standards.
  • Allowances/Credits: Facilities can generate Saskatchewan-based Performance Credits (PCs) for emissions below the benchmark and must submit compliance units for emissions above the benchmark.

Manitoba

Program Name: Federal OBPS (no separate provincial system)

  • Administration: Environment and Climate Change Canada (ECCC)
  • Benchmarks: Industry-specific benchmarks based on national standards.
  • Allowances/Credits: Surplus credits for emissions below the benchmark; compliance units required for emissions above the benchmark.

Ontario

Program Name: Federal OBPS (no separate provincial system after the cancellation of the Ontario Cap and Trade Program)

  • Administration: Environment and Climate Change Canada (ECCC)
  • Benchmarks: Industry-specific benchmarks based on national standards.
  • Allowances/Credits: Surplus credits for emissions below the benchmark; compliance units required for emissions above the benchmark.

Quebec

Program Name: Quebec Cap-and-Trade System for Greenhouse Gas Emissions (Système de plafonnement et d’échange de droits d’émission de gaz à effet de serre)

  • Administration: Quebec Ministry of the Environment and the Fight Against Climate Change
  • Benchmarks: Set caps on total GHG emissions allowed.
  • Allowances/Credits: Facilities receive or buy emissions allowances and can trade them within the market.

New Brunswick

Program Name: Federal OBPS (no separate provincial system)

  • Administration: Environment and Climate Change Canada (ECCC)
  • Benchmarks: Industry-specific benchmarks based on national standards.
  • Allowances/Credits: Surplus credits for emissions below the benchmark; compliance units required for emissions above the benchmark.

Nova Scotia

Nova Scotia has been transitioning from its cap-and-trade system to the federal Output-Based Pricing System (OBPS). As of 2023, the province announced it would no longer use its cap-and-trade program, and instead, large industrial emitters in Nova Scotia are now subject to the federal OBPS. This transition aligns with federal climate policies and aims to ensure consistent carbon pricing across Canada.

Program Name: Federal Output-Based Pricing System (OBPS)

  • Administration: Environment and Climate Change Canada (ECCC)
  • Benchmarks: Industry-specific benchmarks based on national standards.
  • Allowances/Credits: Facilities earn surplus credits for emissions below the benchmark and must submit compliance units for emissions above the benchmark.

Prince Edward Island

Program Name: Federal OBPS (no separate provincial system)

  • Administration: Environment and Climate Change Canada (ECCC)
  • Benchmarks: Industry-specific benchmarks based on national standards.
  • Allowances/Credits: Surplus credits for emissions below the benchmark; compliance units required for emissions above the benchmark.

Newfoundland and Labrador

Program Name: Newfoundland and Labrador Management of Greenhouse Gas Act OBPS

  • Administration: Newfoundland and Labrador Department of Environment and Climate Change
  • Benchmarks: Industry-specific performance standards.
  • Allowances/Credits: Facilities generate Performance Credits (PCs) for emissions below the benchmark and must submit compliance units for emissions above the benchmark.

Northwest Territories

Program Name: Carbon Tax with rebates for large emitters

  • Administration: Northwest Territories Department of Finance
  • Benchmarks: Not specifically an OBPS, but rebates mitigate the carbon tax impact on large emitters.
  • Allowances/Credits: Not applicable.

Yukon

Program Name: Federal OBPS (no separate territorial system)

  • Administration: Environment and Climate Change Canada (ECCC)
  • Benchmarks: Industry-specific benchmarks based on national standards.
  • Allowances/Credits: Surplus credits for emissions below the benchmark; compliance units required for emissions above the benchmark.

Nunavut

Program Name: Federal OBPS (no separate territorial system)

  • Administration: Environment and Climate Change Canada (ECCC)
  • Benchmarks: Industry-specific benchmarks based on national standards.
  • Allowances/Credits: Surplus credits for emissions below the benchmark; compliance units required for emissions above the benchmark.

Each region’s system is designed to align with both federal objectives and local economic and environmental contexts, providing flexibility and encouraging industries to reduce their emissions while maintaining competitiveness.

 

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