Compliance Factsheets

State and Trends of Carbon Pricing Dashboard

The State and Trends of Carbon Pricing Dashboard is an interactive online tool aimed at policymakers, businesses, and researchers. It provides the latest information on existing and emerging direct carbon pricing initiatives around the world.

Name of Instrument

Canada federal OBPS
National ETS
Implemented in 2019
Canada
Set price
Set price schedule
All
Upstream and point of source
Not permitted

Covered Sectors

  • Covered
  • In principle
  • Electricity and heat
  • Industry
  • Mining and extractives

Description

he pan-Canadian approach to carbon pricing was adopted in 2016. The approach requires all Canadian provinces and territories to have a carbon pricing system in place that aligns with the federal standard. A federal carbon pricing backstop system comes into effect, in whole or in part in any province or territory that requested it or that does not have a price on carbon in place that meets the federal standard. The federal backstop system consists of two components: a regulatory charge on fuels, and a baseline-and-credit ETS for emissions-intensive and trade-exposed industrial facilities called the Output-Based Pricing System (OBPS). To comply with the national system, provinces need to implement systems that meet the minimum national carbon price. The minimum national carbon price was set at CAD 65 (USD 48.15) in 2023, increasing by CAD 15 (USD 11.11) each year to reach CAD 170 (USD 125.93) in 2030. As cap-and-trade systems set maximum emissions levels rather than minimum carbon prices, for these systems the minimum carbon pollution price is translated into an equivalent cap on emissions.

Recent Developments

All Canadian provinces and territories had until September 2022 to either request the federal carbon pollution pricing system or propose their own plan for a carbon pricing system for 2023 to 2030 that meets the updated benchmark criteria. As of the beginning of 2024, the federal OBPS applies in Manitoba, Nunavut, Prince Edward Island, and Yukon. The federal government amended its federal “backstop” OBPS in November 2023 to increase the stringency of the output-based standards used to determine facilities’ emissions limits. The rates are now set to decline at a fixed tightening rate with no end date: 2% annual tightening rate for most industrial facilities’ output-based standards and 1% for high-risk EITE facilities. Twelve new output-based standards for industrial activities have also been added to the regulations.

Coverage

Coverage is mandatory for facilities in the EITE industrial and electricity sectors that emit equal to or more than 50,000 tCO2e per year. Smaller facilities with annual emissions equal to or more than 10,000 tCO₂e from sectors at risk of carbon leakage and adverse competitiveness impacts can opt in to participate voluntarily. The federal OBPS is designed to maintain the carbon price signal for industrial emitters to reduce their GHG emissions while mitigating the risk of carbon leakage and competitiveness impacts. It applies to facilities in the emissions-intensive and trade-exposed (EITE) industrial and electricity sectors that emit equal to or more than 50,000 tCO2e. Smaller facilities with annual emissions equal to or more than 10,000 tCO₂e from sectors at risk of carbon leakage and adverse competitiveness impacts can apply to participate voluntarily.

Pricing and allocation approaches

The excess emissions charge compliance option acts as a price ceiling for the system. The excess emissions charge payment (ie, the minimum national carbon price set out in the federal benchmark) is set at CAD 80 (USD 59.26) in 2024, and will increase by CAD 15 (USD 11.11) annually until it reaches CAD 170 (USD 125.93) per tCO2e in 2030. The OBPS sets a performance (output-based) standard (i.e., GHG emissions per unit of output) based on the national production-weighted average emissions intensity for a given activity in covered sectors. Facilities calculate a limit based on their level of production and the appropriate standard(s) and are required to provide compensation for emissions that exceed this limit. Those performing better than the standard are issued surplus credits (compliance units) that they can sell or save to use later. Facilities can comply by: (1) remitting surplus credits purchased from other facilities or retained from previous periods; (2) paying the carbon price; or (3) remitting eligible offset credits. There is no hard cap on emissions under the federal system. The federal OBPS sets emissions-intensity or output-based standards by sector.

Compliance Approaches

Point source. Operators are required to report their annual emissions and production at a facility level in a compliance report. Facilities need to meet their compliance obligations on an annual basis. The use of offset credits is allowed. Two types of offset credits can be used for compliance under the OBPS: recognized units, and federal GHG offset credits. Both types of credits must have been issued for projects taking place in Canada that began in 2017 or later. Recognized units are offset credits issued by a province or territory under a recognized offset program and offset protocol and meet the requirements under section 78 of the OBPS including: have been issued for projects located in Canada and that began in 2017 or later. Since 2022, at least 25% of the compliance obligation must be met in the form of excess emissions charge payment. In the 2019 and 2020 compliance periods, no recognized units or federal GHG offset credits were remitted for compliance

Relation to other compliance CPIs

The federal OBPS only applies in those jurisdictions that requested it or do not have a system in place that meets minimum national stringency criteria.

Covered Emissions

Price range:
in 2023

Indicates instruments with multiple price levels. Only the main rate is shown for these instruments. Data last updated on 1 April 2023

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