The Government of Canada has released its proposed Greenhouse Gas Offset Credit System Regulations (Regulations) for public comments until May 5. The Regulations are intended to establish an offset system under the federal Greenhouse Gas Pollution Pricing Act (GGPPA), enabling the Minister of the Environment to issue offset credits for voluntary greenhouse gas (GHG) reductions achieved by eligible projects. Offset credits are among the types of compliance units that regulated facilities can use to cover any GHG emissions exceeding their emissions limits under the GGPPA’s Output-based Pricing System (OBPS).
The main elements of the draft Regulations include project eligibility criteria, registration requirements, crediting and reporting requirements, and establishment of an environmental integrity account.
To generate federal offset credits, projects would have to satisfy certain eligibility criteria, including:
When applying to register an offset project or transfer an existing registration, the project proponent must furnish information regarding the project activities, GHGs to be reduced/removed, baseline project scenarios, as well as:
The Regulations set out the periods during which eligible projects may generate federal offset credits. Generally, the crediting period is 30 years for forestry projects, 20 years for other biological sequestration projects, and eight years for other project types. The crediting periods for projects may be extended up to two times, with the exception of biological sequestration projects which are subject to a different limit of no more than 100 years in a credit period (including renewals). The Regulations also stipulate requirements for reports that proponents must submit, including an initial project report no more than six months after year one in the crediting period, and at least once every six years thereafter for biological sequestration projects, or at least once every three years thereafter for other project types.
The quantity of offset credits issued would be based on the proponent’s GHG statement in their report that must be verified by an accredited third party. The Regulations also outline the circumstances when the Minister of the Environment may suspend credits or when a proponent may be required to replace credits, including as a result of reversals or errors/omissions in a report.
As a form of insurance for the integrity of the offset system, the proposed Regulations would establish an environmental integrity account in which a percentage of offset credits issued in respect of a given project would be deposited by the Minister. In the event GHG reductions resulting from an offset project activity are reversed due to circumstances outside the proponent’s control, credits in the account would be cancelled to compensate for the reversal. Similarly, if a proponent failed to replace any invalidated offset credits, the Minister could decide to use credits from the environmental integrity account to effect the replacement.
For biological sequestration activities, the percentage of credits deposited in the account would be based on risk factors set out in the applicable offset protocol. For other projects type, the percentage of credits deposited would be 3% of the credits issued in respect of the project.
The public comment period for the proposed Regulations is open until May 5. Written comments can be sent to [email protected]. Once draft offset protocol start becoming available, there will be a consultation period of 30 days for each protocol.
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1 See Torys bulletin regarding the most recent offset system design discussion paper released in July 2020.
2 As indicated by Environment and Climate Change Canada’s website for offset protocol development, the first phase of development will focus on: advanced refrigeration systems, improved forest management, landfill methane management, and enhanced soil organic carbon.
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