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On August 29, 2018 Premier Doug Ford announced the removal of the cost of carbon tax from natural gas rates by October 1, 2018. The Minister of Energy, Norther Development and Mines, Greg Rickford, wrote to the Ontario Energy Board (“OEB”) setting out the government’s expectations that natural gas utilities remove the cost for consumers, and ensure any over-collection of the tax is refunded. The OEB is expected to provide direction to natural gas utilities no later than August 31, 2018 instructing utilities to establish new customer rates with the carbon tax charges removed.

This announcement comes on the heels of the federal government’s announcement on July 27, 2018 that large industrial companies will face less-stringent threshold on emissions when Ottawa’s carbon tax rolls out on January 1, 2019. The federal government’s update on the output-based pricing system (“OBPS”), also known as the carbon tax, indicates that new thresholds will be used in determining when penalties may be issued for certain emissions. These thresholds will differ depending on the industrial sector that the emitter belongs to and the amount of emissions being produced.

The OBPS standards apply to all industrial facilities that emit a minimum of 50 kilotonnes of carbon dioxide annually. Industrial facilities emitting less than 50 kilotonnes may voluntarily opt in to the OBPS. The OBPS is what is being referred to by the federal government as a “backstop” measure. The purpose of the OBPS is to ensure that all provinces and territories comply with a certain minimum of carbon pricing.

While provinces and territories can set their own standards, if those standards do not meet the federally-established benchmark then the OBPS would apply. Likewise if there is no system in place the OBPS would also apply.

Carbon pricing is the key component of the Pan-Canadian Framework on Clean Growth and Climate Change which has been previously blogged about. In October 2016 the federal government published the approach to carbon pricing to ensure its application to a broad set of emissions sources throughout Canada starting in 2018 with increasing stringency over time.

On August 2, 2018 the Ontario government announced its intention to bring a constitutional challenge against the federal government over its carbon tax plan. Premier Ford, during his election campaign, committed to fighting the federal government’s carbon pricing and eliminate Ontario’s cap-and-trade system which he has already done through legislation.

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