On April 1, 2024, British Columbia's new Output-Based Pricing System (OBPS) came into force and will replace the existing CleanBC Industrial Incentive Program (CIIP). The OBPS is an emissions pricing system based on performance and output and will be used to meet BC's climate plan outlined in the CleanBC Roadmap to 2030. The OBPS was created through amendments to the Greenhouse Gas Industrial Reporting and Control Act (GGIRCA) and associated regulations.

Who is regulated by the OBPS?

Compliance with the OBPS is mandatory for certain large industrial operations who emit 10,000 tonnes of carbon dioxide equivalent (CO2e) or more per year. The industries captured are outlined in the GGIRCA and are primarily in the mining and oil and gas sectors. In addition, businesses/operations that are not automatically regulated by the OBPS may opt-in to the system. 

How does compliance with the OBPS work?

The OBPS imposes an annual "operation specific emission limit" (the Limit) which gradually becomes more stringent each year. Operations that reduce their emissions below their Limit earn credits (Earned Credits) which can be traded or saved to meet future Limits. Operations that exceed their Limit must either purchase Earned Credits, Offset Units or make a payment at the prescribed price (the Compliance Charge).

Offset Units are created by approved carbon offset projects. However, an operation may only use Earned Credits and Offset Units to meet a portion of its total compliance obligation. That limit is 50% in 2024, 40% in 2025 and 30% from 2026 to 2030. Earned Credits do not expire, but the use of Offset Units is restricted by vintage. In particular, Offset Units generated within three years of the beginning of the compliance year may be used for compliance purposes – effectively tightening the market and ensuring there is not a significant "hold" strategy employed by participants. In line with the federal pricing scheme on greenhouse gas emissions, in 2024, the Compliance Charge on emissions in excess of the Limit is CA$80 per tonne of CO2e, and will increase by CA$15 per tonne each year to CA$170 per tonne of CO2e in 2030.

Each operation's Limit is calculated as follows:

Limit per product =

Annual Production x Reduction Factor x Production Weighted Average Emissions Intensity

Annual Production is the amount of product generated in a given year.

Reduction Factor is the percent of priced emissions for a specific product, ranging from 65% for most products to 95% for aluminum smelting. The Reduction Factor allows certain industries to have a portion of their emissions exempted. This is to ensure those industries operating in BC can remain competitive with ones operating in jurisdictions without or with less stringent emissions pricing or trading systems. Industries with the largest Reduction Factors are generally ones with minimal room for additional decarbonization.

Production Weighted Average Emissions Intensity is the total emissions of the product divided by the total production amount of the product.

Note that for an operation with multiple products, the Limit is the sum of Limits for each regulated product of that operation.

The Limit will also be tightened by 1% each year, except for certain industrial process emissions which will have a 0% tightening rate. These process emissions arise from chemical reactions necessary to produce certain products such as aluminum, cement or lime and are processes which are generally difficult to decarbonize or abate due to prohibitively high costs or technological limitations.

How can an operator register for the OBPS?

First, obtain a Business BCeID associated with the legal business name of the operator. This can take three to five weeks to receive following application submission.

Next, the operator must apply for a BC OBPS Regulated Operation ID (BORO ID) for each operation through the BC Industrial Emissions Reporting System (BCIERS). Each application takes three to five days to process.

Once approved by the Director of GGIRCA, a BORO ID will be assigned to the operation. The operator may then utilize the BORO ID to claim a carbon tax exemption for regulated operations with the Ministry of Finance.

To learn more about BC's OBPS, registering for the OBPS, generating Offset Units, or compliance with reporting obligations, please reach out to the authors, Byron Reynolds, Hazel Saffery or Jack Yuan.