Manitoba Releases Discussion Paper for Output-based Carbon Pricing System

July 31, 2018

The Government of Manitoba has released details of its forthcoming output-based pricing system (OBPS) in a discussion paper published yesterday titled "Draft Regulatory Framework for a Made-in-Manitoba Output-based Pricing System." The discussion paper follows Manitoba's October 27, 2017, publication of the Made-in-Manitoba Climate and Green PlanThe government invites interested parties to provide written feedback on the proposed regulatory framework by September 30, 2018.

 

Design Principles

 

The OBPS is anchored in the following design principles:

  • greenhouse-gas reductions;

  • minimizing risk of carbon and investment leakage;

  • reducing red tape;

  • harmonization with policies and regulations of other jurisdictions;

  • predictability;

  • transparency; and

  • continuous improvement, with a comprehensive review scheduled for 2022.

 

Covered Facilities

 

The OBPS will apply to industrial facilities with annual emissions of 50,000 tonnes or greater of carbon dioxide equivalent (CO2e) but will not apply to municipalities, universities, schools, hospitals, landfills, waste-water treatment facilities, or natural gas distribution networks. The OBPS will cover emissions from the following on-site sources: stationary combustion, on-site transportation, industrial processes and product use, waste and wastewater, flaring, and some venting and fugitive sources. Specific consideration will be given to new market entrants.

 

Emissions-Intensity Performance Standards

 

The government continues to develop emissions-intensity performance standards for the OBPS and is considering facility-specific standards, sector-level standards, or best-in-class standards. The OBPS will consider the three most recent calendar years of emissions and production data (i.e., 2015–2017) to calculate emissions-intensity performance standards. The stringency of emissions-intensity performance standards will increase over time. An annual two percent (2%) declining cap factor is currently under consideration. Industrial process emissions will be excluded from the declining cap factor to recognize the limited emissions reduction opportunities available for fixed, industrial process emissions.

 

Reporting and Compliance Obligations

 

Emissions reporting is expected to be required as of January 1, 2019, with performance standards expected to be set in June 2019. The government is considering several options for compliance periods, including annual and multi-year periods.

 

Covered facilities with a compliance obligation must compensate for emissions in excess of the applicable performance standard by:

  1. Remitting an emissions performance credit (issued for each tonne of emissions below a facility's emissions limit) at a rate of one credit for each tonne of emissions in excess of the limit;

  2. Paying a levy at a rate of $25 for each tonne of emissions in excess of the limit; or

  3. A combination of (1) and (2).

 

The government will also consider offsets as a potential compliance option for covered facilities, with priority given initially to offset activities and protocols in agriculture, waste, and land use change and forestry.

 

Voluntary Opt-in

 

Industrial facilities that have emissions between 10,000 and 50,000 tonnes CO2e and compete in an emissions-intensive, trade-exposed sector or sub-sector will be eligible to voluntarily join the OPBS beginning January 1, 2020. 

 

Please contact Lisa DeMarco at lisa@demarcoallan.com should you wish to discuss the foregoing.

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