Name of Instrument
Ontario EPS
Subnational - State/Province ETS
Implemented in 2022
Ontario
Baselines (Intensity-based)
Price ceiling
All
Point Source
Not permitted
Covered Sectors
- Covered
- In principle
Description
Ontario’s Emissions Performance Standards (EPS) program came into effect in January 2022, replacing the federal output-based pricing system (OBPS) that was operational in Ontario from 2019 to 2021. It is an intensity-based ETS for large industrial emitters, in which each covered entity must surrender compliance units for emissions that exceed the facility’s annual emissions limit. The annual emissions limit is based on facility-specific, sectoral, or historical emissions benchmarks, depending on the facility. The system applies to the same sectors and gases as the federal OBPS.
The federal fuel charge took effect in Ontario in 2019 and remains in effect, with the price rising CAD 15 (USD 11.11) each year until 2030, resulting in a price of CAD 170 (USD 125.93) per tCO2e in 2030.
Recent Developments
Ontario made regulatory amendments to the EPS program to meet the federal benchmark and continue the program from 2023 to 2030.
Aligning with the federal benchmark requirement pricing trajectory, the EPS program 2023 price rose to CAD 65 (USD 48.15) per tCO2e and increased to CAD 80 (USD 59.26) per tCO2e in 2024.
Ontario strengthened the performance standard for generating electricity using fossil fuels and adjusted the factors applied to reduce the annual emissions limits of a facility.
Since 2023, the Ontario EPS has begun recognizing CO2 emissions that are captured and stored permanently in certain carbon capture and storage (CCS) projects as emissions reductions at EPS covered facilities. Carbon capture and utilization (CCU) is not currently recognized as an emissions reduction method in the EPS.
Coverage
The intended scope of emissions coverage is similar to the federal OBPS. It covers all greenhouse gas emissions from facilities that are engaged in covered industrial activities and with emissions exceeding 50,000 tCO2e/year. Smaller emitters may also be covered by the system, on an opt-in basis.
Pricing and allocation approaches
Price ceiling. Covered entities can purchase and surrender 'excess emissions’ compliance units at the fixed cost set out in regulation, which is aligned with the federal minimum carbon price (CAD 65, USD 48.15, in 2023). The regulated price of EEUs acts as a price ceiling for emissions performance units (EPUs). The price of EEUs increases by CAD 15 (USD 11.11) each year until 2030, resulting in a price of CAD 170 (USD 125.93) per t CO2e in 2030.
Output-based allocation, with sectoral standard, facility-specific and historical benchmarks applied, depending on facilities. 0
Compliance Approaches
Point source. Emissions are reported and managed at the facility level. Annual The use of offset credits is not allowed as a compliance option in the initial years of the system. Ontario is monitoring developments in the offset policy of the Canada federal OBPS and may consider allowing offsets in the future.
Relation to other compliance CPIs
Allocation is determined in relation to annual emissions limits based on emissions intensity benchmarks.
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
