The Regulations Amending the Output-Based Pricing System Regulations (SOR/2025-108) introduce modifications to the federal Output-Based Pricing System (OBPS) under Canada’s Greenhouse Gas Pollution Pricing Act. The amendments adjust the definition of on-site transportation emissions, revise compliance periods for certain facilities, and establish transitional provisions to facilitate the regulatory changes.

The OBPS is a key component of Canada’s carbon pricing framework, which aims to reduce greenhouse gas (GHG) emissions by setting emission limits for large industrial facilities. Facilities exceeding these limits must compensate for excess emissions through credit trading or compliance payments. The federal backstop carbon pricing system applies in provinces and territories that do not implement their own systems meeting national stringency standards. As of 2025, the OBPS covers industrial facilities in Manitoba, Prince Edward Island, Yukon, and Nunavut.

One of the key amendments concerns on-site transportation emissions, which are GHG emissions from vehicles and machinery used within a facility for transporting materials, equipment, or personnel. Previously, only emissions from vehicles using fuel charge-exempt fuels were counted under the OBPS. With the fuel charge being eliminated, the amended definition ensures that all on-site transportation emissions remain subject to carbon pricing under the OBPS. This change prevents potential regulatory gaps that could arise from facilities no longer paying a fuel charge on certain fuels.

Another major regulatory change involves compliance periods for facilities that cease to be covered under the OBPS in 2025. Under the previous regulations, covered facilities had to comply for the full calendar year. However, the amendments shorten the compliance period for voluntary facilities that have their designation canceled by the Minister of the Environment under subsection 172(3) of the Act. For these facilities, the compliance period in 2025 will end on March 31, aligning with the termination of the fuel charge. This ensures administrative consistency and simplifies reporting requirements.

The amendments also establish transitional provisions to manage the shift to the new regulations. The previous definition of on-site transportation emissions remains in effect for compliance periods before April 1, 2025, and for facilities whose designation is canceled under the new rules.

The broader context for these amendments is Canada’s evolving approach to carbon pricing. The federal government announced a refocusing of its carbon pricing framework, emphasizing broad coverage of industrial emissions rather than direct fuel charges. The decision to eliminate the fuel charge on all fuel types and combustible waste is a key policy shift. As a result, regulatory adjustments, such as these OBPS amendments, are necessary to maintain the integrity of carbon pricing mechanisms.

Canada (SOR 2025-108) March 26, 2025
Disclaimer: Insights are for informational purposes only and do not reflect RRI’s official position or constitute legal opinion.