Back to all blog posts

Posted in: Ontario | Environmental Issues | Canada (Federal) | Energy Policy | Carbon pricing

Sep 25, 2020

Ontario’s Carbon Emissions Standards to Replace the Federal Regime for Large Emitters in the Province

By David Stevens and Sara Abhari

On September 21, 2020, the Ontario Minister of the Environment, Conservation and Parks (MECP) announced that the federal government has accepted Ontario’s Emissions Performance Standards (EPS) as an alternative to the federal carbon pricing regime. The federal regime, which is called the Output-Based Performance System (OBPS), applies to large emitters in all provinces that do not have a carbon-pricing regime which the federal government has accepted. Up until September 21, Ontario was one of these provinces. For the purposes of the federal OBPS, large emitters include both facilities reported as emitting 50kt CO2e or more of greenhouse gases, and other facilities that are primarily engaged in any of an enumerated list of industry activities, such as oil and gas production or food processing.

The newly-accepted Ontario EPS regulates the emissions of greenhouse gas by the same high-emitting industrial facilities. These facilities are required to meet standards set out by the EPS for lowering emissions. Where the facility lowers its emissions beyond the EPS-required standard, it receives “compliance units”. Where the facility does not meet the required standard, it is required to purchase compliance units.

Jeff Yurek, the Ontario Minister of the Environment, stated in his news release that the Ontario regime differs from the federal regime in that it phases in the emission-lowering requirements more gradually over time. He stated Ontario’s EPS takes into account specific industry and facility conditions in its standards and does not enforce a blanket cap on emissions. Minister Yurek emphasized that the province’s goal was to help achieve 2030 emission reduction targets pursuant to the Paris climate agreement while supporting the overall growth of the Ontario economy and not driving away business to other jurisdictions.

Just as in Ontario, the federal government has recently also accepted New Brunswick’s carbon pricing system. For both provinces, the transition date remains uncertain. As a result, the federal OBPS continues to apply and all compliance obligations under the OBPS, including the annual and verification reporting requirements for the 2019 year, must continue to be met for the time being. It remains uncertain whether the federal government will continue to collect the amounts payable for emissions until the transition date for facilities covered by the Ontario EPS.

The federal OBPS, which came into effect on January 1, 2019, after the cancellation of Ontario’s Cap and Trade program in 2018, has faced constitutional challenges in the courts. The federal carbon pricing regime has been challenged not only in Ontario’s Court of Appeal, but also in Saskatchewan and Alberta, on the grounds that the federal government has exceeded its jurisdiction and is encroaching on provincial, constitutionally-mandated powers. The provincial appeal courts have come to different results: Ontario and Saskatchewan courts upheld the federal carbon levy as constitutional pursuant to the Parliament’s peace, order and good government powers, while the Albertan court found the levy unconstitutional.

This week, the Supreme Court of Canada heard the appeal of these three decisions over the duration of two days, the first in-person hearing it has had since the COVID-19 shut down in March. The Supreme Court reserved its decision.

The outcome of the Supreme Court decision remains relevant as it determines the constitutionality of the federal fuel charge as well as the federal OBPS regime that continues to apply to provinces which do not have their own carbon pricing system. The Supreme Court’s decision will also provide guidance about the scope of Parliament’s power in the coming years to legislate over climate change measures within the provinces.

Areas of Expertise

Related Blogs

Alberta Court of Appeal Rules That Federal Carbon Levy is Unconstitutional By David Stevens Feb 26, 2020 On February 24, 2020, the Alberta Court of Appeal (Alberta CA) issued its decision in Reference re Greenhouse Gas Pollution Pricing Act, 2020, finding (by a 4:1 majority) that “the regulation of GHG emissions or any variation on this theme does not qualify for inclusion as a f...

Posted in: Climate Change / Renewables | Ontario | Energy Policy

Insights EnergyInsider
Ontario Court of Appeal Rules That Federal Carbon Pricing Act Is Constitutional By Emily Chittick Jul 04, 2019 The Ontario Court of Appeal has ruled that federal carbon pricing is constitutional. In a 4-1 decision, the court rejected Ontario’s claim that the federal carbon levy is outside the federal government’s jurisdiction. This decision comes just a month after the Saskatchewan Cour...

Posted in: Canada (Federal) | Climate Change / Renewables

Insights EnergyInsider
Canada’s Carbon Pricing Strategy Falls Short of Paris Agreement Target By David Stevens and Stan Fedun Jun 18, 2019 A recent report published by the Office of the Parliamentary Budget Officer, Closing the Gap: Carbon pricing for the Paris target, estimates that Canada will need to impose a total carbon tax of $102 per tonne if it wishes to meet its Paris Agreement emissions target by 2030. Under the ...
Alberta Passes Legislation to Repeal Provincial Carbon Tax By Stan Fedun and David Stevens Jun 17, 2019 Shortly after Alberta’s United Conservative Party won a majority mandate, Premier Jason Kenney announced the first order of business for his government would be to “repeal the carbon tax, implement the Job Creation Tax Cut, cut red tape and open Alberta for business.”

Posted in: Climate Change / Renewables | Saskatchewan | Ontario | Practice & Procedure

Insights EnergyInsider
Saskatchewan Court of Appeal Affirms Federal Carbon Pricing Act is Constitutional By Emily Chittick May 24, 2019 Saskatchewan’s highest court has ruled that the federal carbon pricing legislation is constitutional. On May 3, 2019, the Saskatchewan Court of Appeal released its decision on the reference with a split 3-2 outcome stating that climate change is a vital national issue and the...