1. Ontario’s New System to Price Industrial Pollution Emissions Performances Standards (EPS)
March 15, 2019

2. EPS Objective
Targeting Large Emitters – Emission Performance Standards
Emission Performance Standards (EPS) will apply to industrial facilities to regulate their GHG emissions. The MECP will set sector-wide or facility-level GHG emission performance standards associated with levels of output or production from regulated facilities - Proposed to replace Federal OBPS
There is no charge on fuels as part of this program
Source: Made in Ontario Environment Plan
EPS Objectives
Encourage emission reductions from large emitters while maintaining competitiveness and minimizing risks of carbon leakage
Meet federal requirements to have the EPS program approved and replace the Federal OBPS
Sept 2018 ECCC Deadline?
Minimize regulatory burden

3. Compliance Options There is a price on carbon
If the determined EPS are not met and facilities emit in excess of their annual emission limit, they will have to comply by using the following compliance options:
Payments made for excess emissions -the price for these compliance units will start at $20 per tonne in 2019 and increase $10 per year to a maximum of $50 per tonne in 2022 (in line with the Federal carbon price).
Funds would go into an emission reduction fund
Retroactive to Jan 1, 2019
Purchasing compliance units from other facilities that generated compliance units by emitting below the performance standard.
Compliance units for voluntary reductions (offset credits)
There is a price on carbon
No trading system/registry in development at this time

4. Regulated Entities
Covered Sectors (same as Federal OBPS)
Cement
Chemical sectors, including carbon black
Electricity generation
Food sectors (sugar and wet corn milling)
Industrial, food and fuel ethanol
Metal tubes and steel (from scrap or ores)
Lime
Metal from mining or milling of ore
Mineral products (brick, gypsum, mineral wool, glass)
Natural gas liquids
Natural gas transmissions pipelines
Non-ferrous metal smelting, refining (e.g. nickel, copper)
Petroleum refineries
Oilseeds processing
Pulp and Paper
Upstream oil extract and upgrading
Vehicle manufacturing
Additional Sectors
Institutions (hospitals and universities)
Greenhouse operators
Thermal energy supply
Mandatory Participation Threshold:
25,000 tonnes CO2e or 50,000 tonnes CO2e (under consideration)
Voluntary participation threshold:
10,000 tonnes CO2e
Aim is to get as many facilities under EPS program as possible

5. Performance Standards Methods
Electricity generation
Performance standard for all electricity generation (by a utility or by industry) will be set taking into consideration the emission intensity of current natural gas fired electricity generators. (420 t/GWh)
Thermal Energy (steam) generation
Generation of thermal energy (e.g., steam) takes place outside of a regulated facility and the thermal energy is supplied to industrial or residential customers. Based on the performance of an efficient boiler. (e.g.90% overall efficiency).
Cogeneration
A facility with cogeneration generates both electricity and heat for use in mostly industrial processes. The performance standard for cogeneration would take into consideration the performance of an efficient natural gas-fired cogeneration system (e.g., 90% overall efficiency).
Sector Based Performance Standard
Based on weighted sector average emissions intensity for historical years (e.g ). This includes direct emissions (fixed process and combustion) related to the industrial operations.
Facility Specific Emissions Intensity
Based on facility specific average emissions intensity rather than the average emissions intensity of multiple facilities.
Energy Use Intensity
Based on the amount of fuel (e.g., natural gas, fuel oils) used at the facility. Total Fuel Energy Input (in GJ) used at the facility times the emissions factor based on natural gas.
Historical Average Emissions Limits
Based on recent average historical emissions for the regulated facility (e.g., ). Emission limits based on a facility’s historical emissions are not tied to facility production changes or energy use.

6. Stringency Factors
Stringency factors will apply to the EPS determined under the proposed methods.
* In recognition of the significant reductions made in the electricity sector, a stringency factor may not be applied
The stringency factor will give consideration to emissions intensity and trade exposure (competitiveness impacts/carbon leakage) and will separate fixed and non- fixed process (combustion) emissions
EITE Level
Emission Type
2019
2020
2021
2022
High
Fixed Process
100%
Non-Fixed
98%
96%
94%
92%
Medium/Low
Non-Fixed Process
95%
90%
85%
80%
Source: MECP

7. What’s Next Key Dates Events to watch out for
March 29, Commenting period deadline for EPS regulatory proposal. Comments to be made directly on the Environmental Registry
February – May, 2019 – Stakeholder consultation sessions
June 2019 – (Intended) Final EPS regulations to be complete and would apply retroactively as of January 1, 2019
Events to watch out for
OEB approval of Enbridge’s proposal to add the Carbon Levy costs to customer bills
Ontario’s Constitutional Challenge against the implementation of the Federal Backstop (April 15-18)
Upcoming Federal election (October 2019)
Will the EPS ever be relevant?
Market Certainty- when?

8. Managing Director, Origination
Contact Details
Michael Berends
Managing Director, Origination
1 (416)