New GHG Reduction Project Funding

Recently, the government of Canada announced and launched two exciting new funding opportunities aiming to leverage Canadian ingenuity to reduce greenhouse gas (GHG) emissions and fight climate change. The first is the Low Carbon Economy Challenge which is part of the larger Low Carbon Economy Fund (LCEF). The second is the Decarbonization Incentive Program which aims to return proceeds collected from the Output Based Pricing System (OBPS) to jurisdictions of origin.

Both funding programs have the same overarching goal but vary slightly in terms of funding restrictions, timelines and scope. In the following blog post, we will break down the high-level details of both of these programs to get you up to speed.

Low Carbon Economy Challenge:

As mentioned above, the Low Carbon Economy Challenge is just one part of the Low Carbon Economy Fund (LCEF). It leverages Canadian ingenuity to reduce greenhouse gas (GHG) emissions and generate clean growth in support of Canada’s clean growth and climate action plans by providing approximately $500 million to a wide range of recipients.

The Challenge is divided into two streams: the Champions stream and the Partnerships stream. The Champions stream second intake is currently accepting Expressions of Interest submissions and will provide over $200 million in funding for GHG emission-reducing projects.

Applicants can request between $1 million and $25 million in funding for eligible project expenditures, with cost-share ranging from 25% to 75% of total project costs depending on the recipient type:

• 25% for for-profit private sector businesses

• 40% for regional/local/municipal governments

• 40% for not-for-profit organizations

• 50% for provincial governments/bodies/boards

• 75% for territorial governments/bodies/boards

• 75% for Indigenous communities and organizations

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This intake has a two-stage application process:

1. submission of an Expression of Interest to screen projects for eligibility

2. submission of a Formal Proposal to evaluate projects for merit.

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Once ready to apply, applicants must submit their Expressions of Interest through an online application portal called the Program Information Management System (PIMS). The Expression of Interest process for the Champions stream opened on January 27, 2022 at 00:01 a.m. Eastern Standard Time (EST) and closes on March 25, 2022 at 08:00 p.m. Eastern Daylight Time (EDT). The full Expression of Interest guide can be found here.

To be considered eligible, a project must result in reductions in GHG emissions in 2030 and over the lifetime of the project.

These reductions must be:

• to sources of emissions controlled by the applicant or project partner (direct) and/or to grid electricity emissions (acquired)

• beyond what is required by existing regulations, standards, or codes and ongoing work by project proponents (incremental)

• directly and immediately the result of activities funded by the program.

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It’s also key to call out that projects cannot start before March 1st, 2023, and must be complete before March 31st, 2025.

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Projects must also meet other eligibility criteria, as follows:

• capacity to make use of commercially available technology

• confirmation of project location

• production of electricity or fuel must be primarily for own use, within the applicant’s or identified partner’s operations (except for projects located in rural or remote communities or for district energy or industrial combined heat-and-power).

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Project types that explore possible methods of reducing GHG emissions but do not implement them are not eligible. Other ineligible project focuses include R&D or demonstration projects, education or capacity building projects, feasibility or pre-engineering studies.

The following activity types within a project are ineligible regardless of whether they meet the other program criteria.

• Active transport (e.g. biking or pedestrian infrastructure)

• Construction of new buildings (wherein GHG emissions reductions are obtained relative to a hypothetical alternative new building)

• District energy systems for new constructions

• Electricity transmission and distribution infrastructure

• Enhancing carbon sinks (e.g., carbon sequestration in forests or soils)

• Fuel transportation infrastructure

• Light emitting diode (LED) lighting retrofits

• Public transit infrastructure and vehicles

• Purchase of new vehicles

• Reductions based solely on behavioural change

• Reductions based solely on products manufactured or sold by the applicant for market consumption (i.e. where GHG emissions reductions can only be realized upon purchase, installation and/or use of the product by an unidentified third party)

• Zero Emission Vehicles (ZEVs) and ZEV infrastructure

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Decarbonization Incentive Program:

The second funding opportunity we want to cover is the Decarbonization Incentive Program which aims to return proceeds collected from the OBPS to jurisdictions of origin. Before we get into the available funding, we need to give a quick overview of the OBPS.

The Output-Based Pricing System (OBPS) is designed to put a price on the carbon pollution of large industrial facilities, while mitigating the risks of carbon leakage and adverse competitiveness impacts that could result from carbon pollution pricing under the federal fuel charge or in certain cases, a provincial fuel charge or levy. Covered facilities are required to provide compensation for GHG emissions that exceed an emissions limit and are issued surplus credits if their emissions are lower than the applicable emissions limit. Facilities can sell surplus credits or bank them for use in future years.

To ensure that carbon pollution pricing is applied throughout Canada, the OBPS applies to any province or territory that requests it or that does not implement its own system that meets the federal benchmark requirements. These provinces and territories are referenced in this document as backstop jurisdictions. Backstop jurisdictions include: Ontario, New Brunswick, Manitoba and Saskatchewan.

The Government of Canada has committed to return proceeds collected from the OBPS to jurisdictions of origin. Jurisdictions that have voluntarily adopted the OBPS can opt for a direct transfer of proceeds collected. Proceeds collected in other backstop jurisdictions (current or past) will be returned through the two program streams of the OBPS Proceeds Fund.

The Program’s key objective is to incentivize long-term decarbonization of Canada’s industrial sectors and support Canada’s GHG emissions reductions goals. The Program will support single or multi-year projects to accelerate the deployment of commercially available and proven low-carbon technologies and processes that will further reduce GHG emissions in backstop jurisdictions.

Applications will be accepted on a continuous basis for a minimum of two months starting on February 14, 2022. Applications will be accepted until available funding within their respective eligible province has been allocated.

Eligible facilities are those that:

• are located within an eligible province

• are or were subject to OBPS regulations, and

• do not generate electricity as their primary activity

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To be considered for funding under the Program, the project must occur at an eligible facility and result in GHG emissions reductions. To be eligible, these GHG emissions reductions must be:

• material in the year 2030 and measurable over the lifetime of the project

• affecting sources of GHG emissions either within the facility’s direct control and/or from acquired sources of energy such as electricity or purchased heat/steam, and

• incremental to GHG emissions reductions obtained by other required actions, such as regulatory requirements or business-as-usual maintenance and repairs

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Regardless of available funding, projects may not request more than $10 million in total project funding from the Program. Projects must also request a minimum of $500,000 of total project funding, while respecting the cost-share limits described below.

The Program may contribute up to the following maximum funding amounts per project:

• for private for-profit organizations: up to 30% of total eligible expenditures of the project

• for universities and hospitals or any other public sector body or board, and for not-for-profit organizations: up to 40% of total eligible expenditures of the project

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Applications will be accepted online on an ongoing basis through Environment and Climate Change Canada’s (ECCC) Program Information Management System (PIMS), accessible through the Single Window Information Management (SWIM) system login.

If you have a project in mind that you think may qualify for either program or would like to discuss starting a project, please reach out and we can help guide you through the Application Process and help get your project planned, funded and off the ground.