May 2021
Made-in-Ontario Environment Plan
On November 29, 2018, Ontario released its Preserving and Protecting our Environment for Future Generations: A Made-in-Ontario Environment Plan [PDF]. Under the plan, Ontario commits to reducing its carbon dioxide (CO2) equivalent emissions by 30% below 2005 levels by 2030. This target aligns Ontario with Canada’s 2030 target under the Paris Agreement.
The plan proposes, amongst other things, the following actions:
- Emissions Performance standards – Create the emissions performance standards (EPS) program to achieve greenhouse (GHG) emissions reductions from large emitters. As described below, the EPS has since been developed and was accepted as an alternative to the federal Output-Based Pricing System (OBPS) established by the Greenhouse Gas Pollution Pricing Act.
- Ontario Carbon Trust – Launch an emission reduction fund to encourage private investment in clean technology solutions. This fund will use public funds to leverage private investment in clean technologies that are commercially viable.
- Ontario Reverse Auction – Establish an auction system that allows bidders to send proposals for emissions reduction projects and compete for contracts based on the lowest-cost GHG emission reductions.
- Greener Gasoline – Increase the renewable content requirement in gasoline to 15% as early as 2025 through the Greener Gasoline Regulation.
On August 14, 2020, the province announced that it would be launching Ontario’s first-ever multi-sector climate change impact assessment as a key component of the Plan. The assessment seeks to better understand where and how climate change is likely to affect communities, critical infrastructure, economies and the natural environment. The final results of the assessment are expected to be released in 2022.
Carbon pollution pricing
On September 21, 2020, the federal government accepted Ontario’s EPS program as an alternative to the federal OBPS established by the federal Greenhouse Gas Pollution Pricing Act (GGPPA).
Ontario’s EPS regulates GHG emissions from large industrial facilities by setting standards for lowering emissions that facilities are required to meet. The EPS was created under the Greenhouse Gas Emissions Standards Regulation (O. Reg. 241/19), which came into effect in July 2019, but had yet to be enforced to avoid duplication with the OBPS.
To date, only the registration and record keeping provisions under O. Reg. 241/19 have come into effect, while the significant details of the transition from the OBPS to the EPS are being finalized by the Ontario and Federal governments. Once that transition is finalized, the EPS will:
- apply to sectors covered by the OBPS based on an emissions threshold of 50,000 tCO2e per year (with smaller facilities that emit between 10,000 and 50,000 tC02e able to voluntarily opt-in to the system over time);
- require regulated entities to reduce emissions or purchase/use compliance units to cover the difference between the regulated entity’s total emissions and annual limit imposed by the EPS program; and
- set the price of compliance units in lockstep with the federal carbon price, starting at $20 tCO2e in 2020 and gradually increasing by $10 every year to $50 tC02e in 2023.
On March 29, 2021, the Federal Government announced that it had informed the Government of Ontario of its intention to take the necessary steps to transition Ontario from the OBPS to the EPS on January 1, 2022. It is anticipated that additional information on the steps required to transition to the EPS will be communicated in the coming months to persons responsible for industrial facilities currently subject to the OBPS in Ontario.
The other major component of the GGPPA — the federal fuel charge (Fuel Charge) — continues to apply in Ontario. The Fuel Charge applies a per-litre charge on various fuels types and combustible waste, which are set out in Schedule 2 of the GGPPA. The Fuel Charge is currently $40 per tonne of CO2 equivalent and will rise a further $10 to $50 on April 1, 2022.
Constitutional challenge
Ontario challenged the constitutionality of the federal Greenhouse Gas Pollution Pricing Act. In Reference re Greenhouse Gas Pollution Pricing Act [PDF], the Ontario Court of Appeal upheld the constitutionality of the federal pollution pricing system. The Court noted that “[t]he need for a collective approach to a matter of national concern, and the risk of non-participation by one or more provinces, permits Canada to adopt minimum national standards to reduce GHG emissions.”
On September 22 and 23, 2020, the Supreme Court of Canada (SCC) heard appeals in relation to Ontario’s challenge, together with similar reference appeals from Saskatchewan and Alberta. At the SCC hearing, all the provinces, except British Columbia, brought strong positions against the Act on the basis that it is paternalistic and usurps their right to impose their own climate change policies. British Columbia argued in support of the constitutionality of the Act, emphasizing that federalism should not be a barrier to addressing climate change. The federal government argued that denying Parliament jurisdiction would “leave a gaping hole in the Constitution.”
On March 25, 2021, the Court released its much-anticipated decision, upholding the constitutionality of the Act. The majority of judges in the 6-3 split decision emphasized the importance of a national approach to addressing climate change, noting that the climate crisis is “an existential threat to human life in Canada and around the world.”
Given that the SCC is Canada’s highest appeal court, this decision is the final say on the Act’s validity.
Coal and fuel
Ontario closed its last remaining coal-fired energy generating plant in 2014, positioning the province as the first jurisdiction in North America to completely phase out coal as a source of electricity generation.
Harmonization of Greenhouse Gas Emissions Reporting Requirements
On February 11, 2020, Ontario amended its Greenhouse Gas Emissions: Quantification, Reporting and Verification regulation (Reporting Regulation) in an effort to better harmonize with federal requirements and reduce unnecessary costs and regulatory burdens for reports. Specifically, these amendments:
- aligned the definition of “facility” under the Reporting Regulation with the facility definition under the federal Greenhouse Gas Reporting Program
- aligned Ontario methods and requirements with the federal quantification methods and other requirements for facilities, where feasible
- provided the ability for the director to require a revised GHG report from a covered facility under certain circumstances; and
- delayed verification of production parameters until Ontario’s EPS is accepted by the federal government and application of the federal OBPS is removed from Ontario, which was announced on September 21, 2020