Verification Guidance for the OBPS Regulations
Purpose of the OBPS Regulations Verification Guidance
The following information provides guidance on third-party verification requirements set out in the Greenhouse Gas Pollution Pricing Act (GGPPA) and the Output-Based Pricing System Regulations (OBPS Regulations). The material is intended primarily for persons responsible for covered facilities and verification bodies, to clarify third-party verification requirements.
Where there are any inconsistencies between this Guidance, the GGPPA and/or the OBPS Regulations, the requirements in GGPPA and/or the OBPS Regulations shall prevail.
Verification report for an annual report or corrected report
In accordance with subsections 13(1) and 62(1) and paragraph 63(1)(b) of the OBPS Regulations, a verification report, containing all the information required under section 52 of the OBPS Regulations and Schedule 5 to the OBPS Regulations must be submitted:
- with an annual report by June 1 of the year following the end of the compliance period; or,
- with a corrected report within 120 days after
- the day on which a notice is submitted under subsection 176(1) of the GGPPA, if the notice indicated that the individual or aggregated errors or omissions would have constituted a material discrepancy under subsection 49(2) of the OBPS Regulations; or
- the day on which the Minister of the Environment and Climate Change (the Minister) requires that it be submitted, in accordance with subsection 177(2) of the GGPPA.
Third-party verification
Under the GGPPA, third- party verification refers to a process by which an independent accredited third party performs a systematic assessment to confirm, with supporting evidence, the accuracy of the total reported quantity of greenhouse gas (GHG) from a covered facility and of production from each specified industrial activity engaged in at the facility within a specified compliance period, and conformance with the OBPS Regulations. Third-party verification is required in international carbon pricing regimes (EU Emissions Trading System, California Cap-and-Trade, etc.) as well as in carbon pollution pricing systems in provinces in Canada.
Objective of third-party verification
Third-party verification increases the credibility and integrity of the overall carbon pollution pricing system and informs, in the context of the OBPS Regulations, the Minister's review of the reported information.
A verification body is required to make, pursuant to paragraph 49(1)(b) of the OBPS Regulations, a determination on whether an annual report or corrected report contains a material discrepancy with respect to the total quantity of GHGs and the production from each specified industrial activity used in the calculation of the emissions limit. They also must provide an opinion on whether the annual report or the corrected report has been prepared in accordance with the OBPS Regulations.
Accreditation requirements for verification bodies
Pursuant to paragraph 49(1)(a) of the OBPS Regulations, a third party is authorized to verify an annual report or a corrected report if:
- it is accredited as a verification body to the ISO Standard 14065 by the Standards Council of Canada (SCC), the American National Standards Institute (ANSI) or another accreditation organization that is a member of the International Accreditation Forum;
- it has a scope of accreditation that is sufficient to verify the annual report or the corrected report, i.e., the verification body has sufficient technical expertise relevant to the industrial activity engaged in at the covered facility; and
- it is not suspended by an accreditation organization that issued the accreditation.
Pursuant to subsection 2(3) of the OBPS Regulations, if ISO Standard 14065 is amended, the previous version of the document may be complied with for a period of four years beginning on the day on which the amended version is published.
SCC and ANSI both maintain a list of accredited verification bodies:
Standards for conducting verifications
Pursuant to paragraph 49(1)(b) of the OBPS Regulations, an accredited verification body must conduct the verification in accordance with either ISO Standard 14064-3 published by the International Organization for Standardization in 2006 entitled Greenhouse gases – Part 3: Specification with guidance for validation and verification of greenhouse gas assertions, published in 2019 entitled Greenhouse gases – Part 3: Specification with guidance for the verification and validation of greenhouse gas statements or the subsequent published version, as set out in their accreditation.
Verification requirements under the GGPPA and OBPS Regulations
Section 173, 176 and 177 of the GGPPA and sections 49 to 52 as well as Schedule 5 to the OBPS Regulations set out the requirements pertaining to third-party verification.
Content required in a verification report
The verification report must include at a minimum, the information set out in Schedule 5 to the OBPS Regulations. The verification report template (.docx) provides guidance on how each section of the verification report may be presented. It also includes some information not in Schedule 5 to the OBPS Regulations but requested by Environment and Climate Change Canada (ECCC) as it improves the clarity of a report and reduces the need for follow-up questions. An accessible HTML version of the Verification Report Template is available as a reference tool.
Errors or omissions identified by the verification body
Pursuant to subsection 13(2) of the OBPS Regulations, before the annual report is submitted, the errors or omissions identified by the verification body must be corrected, if possible. This subsection concerns all errors or omissions, regardless of the magnitude of the misstatement. If the error or omission identified by the verification body is the result of a difference of approach to calculation but not a non-compliance with the requirements prescribed by the OBPS Regulations, this should be clearly stated in the verification report.
Level of assurance
Level of assurance relates to the depth and breadth of verification activities and the resulting level of confidence in the accuracy of reported information. Pursuant to paragraph 49(1)(b) of the OBPS Regulations, an accredited verification body must conduct the verification to a reasonable level of assurance, as defined in ISO 14064-3, which is the highest level of verification assurance.
Materiality
Materiality is the concept that an individual discrepancy (i.e., errors or omissions), or the aggregation of discrepancies could affect significantly the accuracy or completeness, and therefore the reliability of reported information. The OBPS Regulations set materiality thresholds for quantitative discrepancies for both GHGs and production from specified industrial activities.
Subsection 49(2) of the OBPS Regulations specifies when a material discrepancy exists, with the associated formula, with respect to the total quantity of GHGs from a covered facility during the compliance period, and the production from each specified activity. Table 1 below shows the applicable materiality threshold by the total facility GHGs levels.
| GHGs emitted during the compliance period (kt CO2e) | Individual and aggregated errors or omissions for GHGs | Individual error or omission for production from each specified industrial activity |
|---|---|---|
| < 500 | 5% | 5% |
| ≥ 500 | 2% | 5% |
In the situation where a person responsible for a covered facility submits an annual report or corrected report that contains a material discrepancy, the Minister may establish the emissions limit or determine the GHGs emitted from the covered facility based on all available information, pursuant to section 53 of the OBPS Regulations.
In addition, pursuant to section 59 and subsection 64(4) of the OBPS Regulations, surplus credits will not be issued where a material discrepancy exists with respect to the total quantity of GHGs or the production from one of the specified industrial activities that is used in the calculation of the emissions limit for the compliance period, as reported in the annual report or corrected report.
Consecutive verifications
To help ensure the independence of accredited verification bodies, the subsection 50(2) of OBPS Regulations specifies that a verification body must take a three-year break if they have verified six consecutive annual reports with respect to the same facility under the OBPS Regulations. However, this requirement does not apply to corrected reports, which can be verified by the same verification body that verified the annual report being corrected. The verifications conducted under other GHG programs do not count toward the number of consecutive verifications conducted under the OBPS Regulations.
Maximum number of verifications
Pursuant to 50(3) of the OBPS Regulations, within a 9-year span, the same verification body cannot verify more than 6 annual reports for the same facility.
Facility site visits
The person responsible must ensure that their covered facility is visited by an accredited verification body in the circumstances outlined in subsection 51(1) of the OBPS Regulations. The circumstances are:
- if it is the initial verification of the covered facility under these regulations or by the verification body, as per paragraph 51(1)(a) of the OBPS Regulations;
- two calendar years have passed since the verification body has visited the covered facility for the purposes of verifying an annual report or corrected report, as per paragraph 51(1)(b) of the OBPS Regulations;
- in the last annual report for the covered facility, the verification body made an "adverse" or "modified" determination, as per paragraph 51(1)(c) of the OBPS Regulations; or
- the verification body is of the opinion that a site visit is required, as per paragraph 51(1)(d) of the OBPS Regulations.
According to subsection 51(2) of the OBPS Regulations, if buildings that are used for legal, administrative or management purposes are not located where an industrial activity is carried out, the person responsible must ensure that the verification body visits those buildings if data or information necessary for verifying an annual report or a corrected report is kept in those buildings.
In accordance with paragraph 49(1)(b), the accredited verification body must conduct the verification in accordance with ISO standard 14064-3. On that basis, note that ISO 14064-3 specifies additional circumstances requiring a site or facility visit and considerations for site selection. Verifications conducted using ISO 14064-3 must follow these requirements, in addition to the OBPS Regulations' facility visit requirements.
A site visit must be conducted in person where required under this provision. A virtual site visit, even if conducted in accordance with guidance provided by the verification body's accreditation organization, does not meet the requirements of the OBPS Regulations.
In general, facility visits conducted for the sole purposes of any other program would not satisfy the requirements of the OBPS Regulations.
Conflict of interest
The independence and impartiality of an accredited verification body in relation to a person responsible (and vice-versa) helps ensure the verification process is credible and that the findings and conclusions are based only on objective evidence. The accredited verification body and the person responsible should identify and analyze any real or potential conflict of interest that threatens or compromises the impartiality of the accredited verification body, initially and throughout the verification process.
In accordance with subparagraph 49(1)(a)(i) of the OBPS Regulations, a third-party is authorized to conduct verification if it is accredited to ISO Standard 14065. On that basis, ISO 14065 requirements for avoiding conflict of interest and managing impartiality must be met.
Pursuant to paragraph 3(l) of Schedule 5 to the OBPS Regulations, a declaration, signed and dated by the lead verifier, stating that the requirements of section 50 of these Regulations have been complied with and that any real or potential conflicts of interest have been effectively managed, must be submitted along with the Verification Report.
Facts discovered by a verification body after the verification
Where the accredited verification body becomes aware of new information or facts after the verification activity is completed and that these facts would either constitute a material discrepancy under subsection 49(2) of the OBPS Regulations, or could materially affect the verification statement, the verification body should communicate the matter as soon as practicable to the person responsible and ECCC.
Learn more
Please refer to the OBPS web page for further information on the GGPPA, the OBPS Regulations, and related policy and guidance. For questions or comments on the federal OBPS, please email stfr-obps@ec.gc.ca or call 1-833-849-9160.
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