Minister of Environment and Climate Change Ministre de l?Environnement et du Changement climatique Ottawa, Canada K1A 0H3 SEP 2 l] 2020 The Honourable Jeff Yurek, M.P.P. Minister of the Environment, Conservation and Parks Government of Ontario 777 Bay Street, 5th Floor Toronto ON M7A 2J3 Dear Minister: Thank you for your recent correspondence regarding Ontario?s pr0posed pricing system for large industrial-emitters, the Emissions Performance Standards (EPS) program. When we spoke in July, indicated to you that under the Greenhouse Gas Pollution Pricing Act, a decision to stand down the application of the federal Output-Based Pricing System (OBPS) is a decision made by the Governor-in- Council. I have presented your pr0posal to the federal Cabinet to seek this decision. The federal benchmark assessment is a fair and transparent process introduced by our government in 2016. Based on the federal assessment, the Government of Ontario?s EPS program meets the federal benchmark stringency requirements for the emissions sources it covers. Therefore, the Government of Canada intends to stand down the federal OBPS in Ontario. However, the system that you have designed is significantly weaker than the federal backstop, and it will result in fewer emissions reductions. It will be important for our respective departments to discuss the operational details of this transition in order to identify a timeline that ensures an orderly transition, which minimizes regulatory uncertainty and integrates the provincial EPS with the federal fuel charge that will remain in place. I have asked Environment and Climate Change Canada of?cials to engage with your officials expeditiously to discuss this. It will also be important to include of?cials from the federal Department of Finance, as the Minister of Finance is responsible for the federal fuel charge, and the provincial EPS program would need to be properly integrated with the federal fuel charge. We are living in a time of twinned crises: the economic and public health crisis of and the economic and public health crisis of climate change and biodiversity decline. The scientific consensus is clear: human activity is driving I?ll Canada 3 anLogo? Paper Papier Eco-Logo" .5 -2- climate change through climate-warming carbon pollution. Canada?s climate is already warming at double the global rate, and at three times the global rate in the North. Climate change is already affecting Canada?s economy, infrastructure, environment, health, and social and cultural well-being. As you know, the science has made it clear that our level of ambition needs to increase over time in order to avoid the worst impacts of climate change. This means Canada needs to both exceed its 2030 target and achieve net-zero emissions by 2050. Provincial action is key to our shared success. The Government of Ontario chose to dismantle the cap-and?trade system in 2018, which will result in a projected increase of 25 to 30 megatonnes of greenhouse gas emissions. Your government did not propose a new approach to price carbon pollution. For this reason, the federal OBPS was put in place. Subsequently, you designed a proposed EPS and came to us in July 2019, asking that this system be assessed against the federal benchmark criteria. When we last spoke, you stated that the EPS would achieve similar reductions as the federal backstop. However, Environment and Climate Change Canada's modelling shows that Ontario?s system will achieve substantially fewer reductions than the federal system, making it much more challenging to reach Canada?s 2030 target. This is concerning to me, and likely also concerning to many Ontarians who support strong action to fight climate change. Ontario?s EPS is not consistent with Canada's longer?term climate goals. I would like our departmental officials to continue to work together in order to discuss design changes that would enable the EPS to achieve greater emissions reductions. It is important that Ontario do its part in reducing greenhouse gas pollution. Achieving Canada's 2030 climate target will take significant collective effort. I am of the view that an important step will be to strengthen the benchmark stringency criteria for the post-2022 period in order to continue to provide a meaningful price signal to industry and to spur innovation and clean growth. The Pan-Canadian Framework on Clean Growth and Climate Change committed to conducting a review of carbon pricing approaches in order to determine a path forward for after 2022. Over the coming months, the federal government will consult with provinces and territories on the post-2022 benchmark. 3 We have a common interest in providing long-term certainty for businesses, and I propose that we continue to work toward a long-term solution on carbon pricing for Ontario. By working together, I am confident we can find a long-term solution that will ensure we reduce pollution and enhance the competitiveness of Ontario's industrial sector. Please accept my best regards. Sincerely, @244 The Honourable Jonathan Wilkinson, P.C., MP. 0.0.: The Honourable Freeland, P.C., MP. The Honourable Dominic LeBlanc, P.C., 0.0., MP.