Comments on the regulatory proposal of Environment and Climate Change Canada for The Output-Based Pricing System regulations under the Greenhouse Gas Pollution Pricing Act

Carbon Market Watch (CMW) welcomes the opportunity to submit comments on the OBPS regulations under the GGPPA which entered into force on June 21, 2018, and would like to formulate comments as below.

1. Carbon leakage and the calculation of the emissions limit

We express strong concerns with the decision to revise the starting point of the output-based standard (OBS) from the initial benchmark of 70% of average emissions intensity of a given activity, to the three-phased approach proposed in this document (80%, 90%, and 95%). This value is represented in the proposal as “ Factor red ”, on page 25. It sets the limit for which installations (or which portion of emissions of a given installation) will be covered by the mechanism. For example, the proposed value of 95% will mean that carbon pricing covers only installations which have an emissions intensity higher than 95% of the average intensity for the given activity. This is very close to saying that only installations with above average emissions intensity will have their emissions priced. Combined with the award of surplus credits for emissions below the limit (see our comment in section 2 below), this will be a major loophole for the environmental integrity of the mechanism. It is also a significant departure from the original plan of rewarding only the best performing installations.

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Comments on the regulatory proposal of Environment and Climate Change Canada for The Output-Based Pricing System regulations under the Greenhouse Gas Pollution Pricing Act