Ontario EPS Market Performance: What Three Compliance Years Show

At a Glance — Compliance Period 2024

Ontario now has three full compliance periods of EPS data, and they show a structurally short market. Obligations grew 56% between 2022 and 2024, to 4.83 Mt, while EPU creation grew 20%, to 0.80 Mt. The province’s EEU sales fill the gap — 83% of all compliance last year — which makes the EEU charge, not scarcity, the price that runs the market.

The tradeable market is maturing fast — the EPU share of compliance has tripled to 17%, transfer activity has grown from 10 trades to 47, and compliance period 2024 was the first in which EPU retirements exceeded new creation. For how the program itself works, see our Ontario EPS program review; this piece is about what the market did with it.

The EPS covered 191 active facilities in its first compliance period (2022), 211 in 2023 and 219 in 2024. Facilities carrying a compliance obligation — verified emissions above their limit — grew from 149 to 170, which leaves roughly 49 facilities at or below their limits in 2024, the pool that earns EPUs. Compliance has been essentially universal: 100% in the first two periods, 99.54% in 2024, when one facility of 219 fell short. The aggregate retirement total sits 1,437 tonnes below the aggregate obligation, consistent with that single gap.

Facility growth came from voluntary opt-ins, and the driver was the federal fuel charge. Fuel used at an EPS-covered facility was exempt from the federal fuel charge, and for facilities in the 10,000–49,999 tCO₂e band the fuel charge cost more than EPS compliance — so opting in paid. That arithmetic ended in April 2025 when the fuel charge was set to zero, and Ontario’s August 2025 amendment opened the exit. Expect the 2025 data to show the count falling as voluntary participants carrying obligations leave; the ones with a reason to stay are those that earn EPUs.

Total compliance demand rose from 3.10 Mt in 2022 to 4.42 Mt in 2023 and 4.83 Mt in 2024 — 56% in two years. Limits tighten annually and the facility count grows, so demand compounds from both directions. Creation of EPUs did not keep pace: 0.67 Mt, 0.78 Mt, then 0.80 Mt. The market runs a structural deficit of roughly 4.0 Mt a year that only the province’s EEU sales can clear.

Source: Ontario EPS program compliance data, current as of February 17, 2026.

Electricity, oil and gas, and metals carried 78% of the 2024 obligation. Electricity is the largest by a wide margin — its obligation more than doubled from 0.99 Mt in 2022 to 2.17 Mt in 2024, 45% of the entire market, and the sector has never earned a single EPU. Oil and gas, which includes the refineries, carried 0.94 Mt. Metals, including iron and steel, carried 0.68 Mt and is growing fast — up 120% over two years. Institutions more than tripled to 0.28 Mt.

Cement and chemicals created 72% of 2024’s EPUs. Cement alone produced 338,897 — 42% of all credits — against an obligation of just 3,281 tonnes, its first obligation in three years. It has never bought an EEU. Chemicals is the second engine, with 232,747 EPUs against a 192,563-tonne obligation, turning net-long in 2024. Auto runs close to balance: 40,174 EPUs created against 43,551 tonnes owed. Everyone else is short, and two sectors — electricity and institutions — have created nothing at all since the program began.

Figure 1 · Two sectors supply the tradeable market; ten draw on it. Electricity’s net obligation is 2.7 times the entire EPU supply.

Source: Ontario EPS program compliance data, current as of February 17, 2026. Sector labels as published; Metals includes iron and steel, Oil & Gas includes petroleum refining.

EEUs bought from the province covered 94% of compliance in 2022, 91% in 2023 and 83% in 2024. The EPU share went the other way — 6%, then 9%, then 17% — as the tradeable market grew into the obligation. EEU retirements were flat between 2023 and 2024 (4.01 Mt both years) even though the obligation grew by 0.41 Mt: the entire increase was absorbed by EPUs.

Compliance period 2024 was also the first in which EPU retirements exceeded new creation — 825,846 retired against 799,095 created, a draw of about 27,000 units on the bank. The active bank — distributed EPUs not yet retired — stands at 823,315 units across the three vintages, about a sixth of one year’s obligation. Nothing has expired yet; under the five-year limit, unused 2022-vintage units (132,706 still active) are the first at risk.

The EEU ledger confirms the settlement lag we described in the program review. EEUs are recorded in the calendar year they are requested and paid for — the year after the compliance period they serve. Purchases of 2.91 Mt in calendar 2023, 4.01 Mt in 2024 and 4.01 Mt in 2025 line up against the EEUs retired for compliance periods 2022, 2023 and 2024. Cement has never bought one.

Source: Ontario EPS program compliance data, current as of February 17, 2026. No EPUs or EEUs have expired to date; the total active EPU bank is 823,315 units.

The EEU charge is the ceiling on what any buyer will pay for an EPU, and it follows the federal benchmark with the one-year settlement lag — $50 payable in 2023 for compliance period 2022, $65 in 2024, $80 in 2025. The secondary market is small but growing — 10 transfers in calendar 2023, 33 in 2024 and 47 in 2025, with volumes rising from 199,077 to 779,249 units.

Average transfer prices were $48.14, $59.59 and $70.08 — 96%, 92% and 88% of the EEU charge payable in each of those years. The discount widened from about 4% to 12% as the EPU bank grew and more sellers came to market. No buyer pays more for an EPU than the province charges for an EEU, so EPU prices sit just under the charge — and the charge follows the federal benchmark, which means the May 2026 benchmark reset also resets where EPU prices can go in future years. The size of the discount under that ceiling is set by supply: with a larger bank and more sellers, buyers negotiated 4% off in 2023, 8% in 2024 and 12% in 2025.

Source: Ontario EPS program compliance data, current as of February 17, 2026. Average transfer price excludes $0-priced transfers. The charge payable in each calendar year serves the prior compliance period and equals that period’s federal benchmark price.

Three years of data show a structurally short market with a small, fast-maturing tradeable layer. Demand grows with tightening limits, while the registrant base shrinks at the voluntary margin as post-fuel-charge exits land in the 2025 data. Supply is concentrated in two sectors and covers a sixth of the obligation; the province clears the difference at the regulated charge. Electricity, oil and gas and metals face compounding EEU bills and are the natural buyers for every EPU created. Cement and chemicals hold the supply, with growing competition to sell it. Every position — banked, sold forward or planned — keys off a charge whose post-2025 level depends on how Ontario answers the federal benchmark reset.

Data: Ontario EPS program compliance data (compliance summaries, sector obligations, EPU and EEU distributions, active units and transfers), current as of February 17, 2026. EEU charges per O. Reg. 241/19, restated by compliance year.

Climate Decode · Advisory

Positioned in the Ontario EPS?

EPU strategy, EEU exposure and facility-level supply-demand modelling under the reset benchmark — we work it end-to-end.