What B.C.’s first OBPS settlement reveals about market behaviour

British Columbia’s Output-Based Pricing System (OBPS) replaced the carbon tax for large industrial emitters on 1 April 2024. The first compliance period covered the nine months to 31 December 2024, with settlement due by 30 November 2025. The Province has not published a compliance summary.

We therefore reconstructed the settlement operation by operation from the B.C. Carbon Registry, which records unit issuance and surrender.

B.C. Carbon Registry project, issuance and retirement reports, 25 to 27 September 2026; Climate Decode B.C. OBPS Market Outlook 2026.

Regulated operations recorded 2.56 Mt CO₂e above their emission limits during the period, equivalent to about 3.40 Mt on a full-year basis. Compliance units could cover up to 50% of an operation’s obligation, with the balance paid in cash at the $80 per tonne compliance price.

Operations surrendered 1.031 Mt of units, comprising 0.801 Mt of offsets and 0.230 Mt of earned credits. The remaining 1.525 Mt was settled in cash, generating about $122 million for the Province. Units therefore covered 40% of the provincial obligation and cash covered 60%.

In 2024, each operation could settle up to 50% of its own obligation with compliance units. Because some operations chose to pay entirely in cash, units covered less than half of the provincial obligation overall.

B.C. Carbon Registry, reconstructed operation by operation. Figures may not sum exactly because of rounding.

Almost all offsets surrendered came from three Great Bear forest-conservation projects, which account for 99% of B.C. offset issuance. Natural gas producers and processors were the largest buyers, surrendering 0.44 Mt of the 0.80 Mt of offsets used.

Operations below their limits received 0.362 Mt of earned credits for the period. Holders used or sold 64% and retained 36%. Most credits used were transferred between operations of the same company, including Canfor, West Fraser, Teck and Tolko, or sold to Westcoast and Tourmaline. Because earned credits do not expire, holders had little reason to sell the full balance immediately.

Offsets remain eligible for their vintage year and the following three compliance periods. Vintage 2021 units reached the end of their OBPS eligibility after the 2024 period and accounted for 78% of offsets surrendered. The settlement therefore shows a clear preference for using the oldest eligible offsets first, preserving newer vintages for later periods.

Units traded at about $65 per tonne, roughly 19% below the $80 compliance price. The discount was modest given the available supply: on a full-year basis, eligible offsets and earned credits were about 4.4 times the quantity the usage limit allowed the market to surrender.

Supply is concentrated among three projects. Because the usage limit caps the volume the market can absorb, cutting prices would do little to increase total sales and would mainly shift market share among the same sellers. That reduces the incentive to undercut competitors and helps explain why units traded near $65, well above the $10–12 typically available once offsets lose OBPS eligibility. If sellers begin competing more aggressively for limited demand, prices could fall materially.

The usage limit falls to 30% from 2026 while the compliance price rises. We model B.C. OBPS supply, demand and unit prices to 2040.

•Lower unit usage. Units can cover at most 40% of an operation’s obligation for 2025 and 30% from 2026. The lower limit increases the share that must be settled in cash.

•Higher compliance price. The compliance price is $95 per tonne for 2025. The Climate Decode model assumes B.C. adopts the federal benchmark of $95 for 2026 and $100 for 2027–29.

•First full-year settlement. Earned credits issued for 2025 already total 0.30 Mt, led by Ovintiv’s electrified Montney gas plants. Settlement for 2025 is due by 30 November 2026.

Climate Decode estimates the 2025 obligation at about 3.35 Mt, with roughly $210 million paid in cash to the Province. The 2025 settlement will provide the first full-year test of market participation under a lower usage limit and a higher compliance price.

Climate Decode · Advisory

What does the 30% usage limit do to your 2026 position?

Operation-level obligation, unit supply and price scenarios across B.C. OBPS, Alberta TIER, Ontario EPS and the federal backstop.

Sources

B.C. Carbon Registry project, issuance and retirement reports (25–27 September 2026); Greenhouse Gas Emission Reporting Regulation, B.C. Reg. 249/2015; ICAP ETS brief (2025/26) for the 2024 price; Climate Decode B.C. OBPS Market Outlook 2026.

This article is analytical research provided for information only and is not investment advice.