Regulatory Amendments to the Ontario EPS Program: What Facilities Need to Know

Regulatory Amendments to the Ontario EPS Program: What Facilities Need to Know

Earlier this year, Prime Minister Mark Carney announced the repeal of the federal fuel charge, effective 1 April 2025. This marked a significant departure from the Trudeau-era framework and signals a renewed focus on industrial carbon pricing by strengthening large emitter programs.

The removal of the fuel charge reduces the incentive for facilities that voluntarily participate in their respective industrial carbon pricing programs to continue doing so, particularly those that do not generate credits. In response, both the federal government and provinces are revising their programs—including the Federal Output Based Pricing System (OBPS), Alberta’s Technology Innovation and Emissions Reduction regulation (TIER), and Ontario’s Emissions Performance Standards program (EPS)—to allow smaller emitters to opt out earlier and expand eligibility for voluntary exits. The Ontario Ministry of the Environment, Conservation and Parks (MECP) has finalized a set of amendments to the EPS program, introducing greater flexibility for facilities. These changes primarily address voluntary participant exit criteria, exit dates, and re-entry rules.

Key Updates

• Voluntary Participant Exit Criteria
  Facilities that qualify as voluntary participants at the time of their request can now choose to exit the EPS program. This marks a shift from the previous restrictions, which only permitted exits in cases where a facility had ceased operations or demonstrated emissions below 10,000 tonnes CO₂e annually for three consecutive years.
  
  
• Voluntary Participant Exit Date
  Applications for cancellation submitted by 31 December 2025 will take effect on 31 March 31 2025. This provides clarity and helps reduce compliance costs for eligible facilities.
  
  
• Voluntary Participant Re-Entry
  Facilities that opt out must now wait two full years before re-registering in the program. The aim is to reduce administrative complexity and regulatory uncertainty.
  
  
• Coming into Force
  The amended EPS regulation and updated GHG Reporting regulation are now officially in effect. The July 2025 versions of the EPS Methodology and Guideline apply to the 2025 compliance year.
  
  
• Emissions Performance Program (EPP) Eligibility
  Industrial facilities that voluntarily exit the EPS program will have access to a 24-month grace period to utilize notional allocations under the EPP.
  
  
• Additional Sectors
  Earlier discussions for this amendment included adding petroleum and coal product manufacturing to the list of mandatory industrial activities. However, this was left out of the final amendment. 

Implications for Carbon Markets

The new exit and re-entry rules introduce potential shifts in Ontario’s carbon market dynamics. Facilities opting out could temporarily reduce compliance demand, which may influence the supply-demand balance for EPS credits. However, ClearBlue expects the market impact to be modest, with total demand across carbon pricing programs projected to decline by less than 10% due to voluntary exits. Understanding how facility participation changes over time will be key to anticipating market liquidity and price signals.

What This Means for Your Facility

For facilities currently participating in the EPS program, these changes create new decision points around whether to remain in or voluntarily exit. The impact on compliance obligations, carbon strategy, and overall cost exposure will vary based on facility operations and emissions outlook.

In addition to opt-out amendments, ClearBlue is closely monitoring upcoming changes to the federal carbon pollution pricing benchmark (‘federal benchmark’). With the next federal benchmark review scheduled by 2026, there are uncertainties about how future equivalency will be determined, what role voluntary opt-outs will play in that evaluation, and how these shifts may impact both program design and facility compliance strategies going forward.

ClearBlue has published a detailed report  unpacking the regulatory changes and their implications for Ontario’s carbon pricing system and will continue releasing insights as more information becomes available. To navigate how the new opt-out provisions could affect your facility, please contact a member of our team.