Canada’s Offset System for Greenhouse Gases

Planned program, currently not active (as of 1/2011).

http://www.ec.gc.ca/doc/virage-corner/2008-03/526_eng.htm


Overview

Market Size and Scope

Offset Project Eligibility

Additionality Requirements and Project Methodologies

Project Approval Process


Overview

Type of Standard and Context

The Government of Canada pledged to reduce Canada's total GHG emissions by 17 per cent from 2005 levels by 2020.

Canada’s Offset System for Greenhouse Gases will serve as a compliance mechanism for facilities that will be regulated under the Government of Canada’s planned greenhouse gas regulations. In June 2009, Environment Canada released an overview of the offset system and two draft guides for public comment: Program Rules and Guidance for Project Proponents and Program Rules for Verification and Guidance for Verification Bodies. The following information is based on the draft documents and should therefore not be considered final. The rules have not been finalized since thye have been published in drfat form for public comments in 2009. it is not clear when the Canadian offset mechanism will be implemented.

Standard Authority and Administrative Bodies

The Minister of the Environment will have overall authority over the design and operation of the offset system, which will be administered as a voluntary program under the Canadian Environmental Protection Act, 1999, section 322.

Regional Scope

Only GHG reductions or removals achieved in Canada are eligible for generating offsets under Canada’s Offset System for Greenhouse Gases.

Recognition of Other Standards/ Linkage with Other Trading Systems

The offset system overview states that if formal linkages are established with other regulatory-based systems in North America or abroad, including offset systems, consideration will be given to the mutual recognition of credits among systems.

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Market Size and Scope

Tradable Unit and Pricing Information

No pricing information is currently available as the program is not yet in force.

Participants/Buyers

Sellers in the offset system can be any legal entity developing an eligible offset project. Buyers may include facilities complying with their reduction targets under the regulations, or any other entities purchasing the credits voluntarily for trading or for compliance under other regulatory systems. Other participants in the offset system may include technical service providers, third-party verifiers, aggregators and traders.

Current Project Portfolio

There are currently no offset projects as the scheme is not yet in force.

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Offset Project Eligibility

Project Types

The draft schedule references external protocols from other programs that may be adapted under the Canadian program. These include:

• Afforestation
• Landfill Gas Capture and Combustion
• Reduced or No Tillage
• Wind Power
• Forest Management
• Wastewater Management
• Anaerobic Biodigesters

No further information is available.

Project Locations

Offset projects must result in GHG emission reductions or removals in Canada.

Project Size

The draft rules do not specify limitations on project size. Similar smaller projects may be aggregated or bundled to reduce project application costs.

Start Date 

Projects must have started on or after January 1, 2006. For projects susceptible to easy reversal (such as no- or reduced-tillage projects in agriculture), a normalized baseline may be specified that projects can use regardless of start date. Reductions occurring on or after January 1, 2011 are eligible for offset credits.

Crediting Period

The crediting period for an offset project is equal to or less than the length of the registration period. The registration period lasts for 8 years and typically begins on the registration date, either the date of acceptance of the project application or any date up to one year after this acceptance if requested. In the case where a project has started to achieve reductions before a quantification protocol is approved for the project type, and the application form is submitted within six months of the publication of an approved protocol, the project proponent may select a registration period starting in the year that the project began reducing emissions.

Registration periods may be renewed once after the first period of eight years with the following restrictions: the registration periods must be contiguous, agricultural sink projects may register for up to 3 registration periods, and forestry sink projects (excluding avoided or reduced deforestation) may register for up to 5 registration periods.

Co-benefit Objectives and Requirements

Offset projects have to comply with existing environmental regulations but do not have to achieve additional co-benefits. Projects may also be required to identify and address the negative impacts of other air pollutant emissions.

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Additionality Requirements and Project Methodologies

Additionality Requirements

Emission reductions or removals from an offset project must be surplus to all federal, provincial/territorial and regional legal requirements and other climate change incentives. If legal requirements vary significantly across the country, the quantification protocol may specify the use of a normalized baseline to ensure jurisdictions with GHG regulations are not disadvantaged. Projects are eligible to receive credits up until the date that a legal requirement comes into force. Climate change incentive programs will not affect eligibility if an agreement to receive funding from the incentive program is entered into prior to January 1, 2011, or a tax incentive is claimed under terms that are in effect as of June 15, 2009.

Project Methodologies

The quantification requirements presented in the most recent draft guide for protocol developers, from August 2008, are based on the framework and principles of International Organization for Standardization (ISO) standard ISO 14064-2: Specification with guidance at the project level for quantification, monitoring and reporting of greenhouse gas emission reductions or removal enhancements.

A top-down approach is outlined in the draft guide, which requires that all projects are quantified using protocols that have been pre-approved by Environment Canada. Offset System Quantification Protocols (OSQPs) are developed by protocol developers external to the federal government. OSQPs set out the quantification approach, monitoring and data management requirements that must be followed by a project proponent when implementing and reporting on an offset project. Protocol developers may choose from a range of approaches for baseline quantification development, including a historic benchmark, a performance standard, and comparison-based, projection-based, pre-registered and normalized baselines; or they may propose another approach. Protocol developers must provide justification for the baseline approach proposed in the Base Protocol Plan they submit for review to Environment Canada. Review and development of quantification protocols will be in accordance with the protocol submission schedule posted on the offset system website.

Permanence of carbon sequestration projects is addressed through a 25-year liability period. Certification statements must attest that no reversal has occurred and provide evidence that quantification protocol requirements are maintained, however verification of the certification statement is not required. If there is a reversal during the liability period or if a certification statement is not submitted, then the project proponent must replace all previously issued credits with an equivalent number of credits that are accepted for compliance by the federal greenhouse gas regulations, to ensure that the environmental integrity of the offset system is maintained. To address the risk that a project proponent may not be able to replace the credits when a reversal occurs, a discount factor, specified in the quantification protocol, will be applied to all offset credits from carbon sequestration projects.

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Project Approval Process

Validation and Registration

To register a project, the project proponent must make an assessment of the project’s eligibility to generate offset credits, and ensure that there is an approved applicable Offset System Quantification Protocol. If no protocol has been approved for the project type, the project proponent can work to develop a new protocol. Once the project proponent has performed this initial assessment, the project proponent must prepare the project application form provided in the Program Rules and Guidance for Project Proponents, demonstrating that the project will satisfy the offset system eligibility criteria. The completed application must be submitted for review. Environment Canada will review the application to ensure that the documentation is complete and to make a preliminary assessment that all eligibility criteria are likely to be satisfied if the project proceeds as per the application. The project application form will be posted on the offset system website for public review and comment. Once the application has been accepted, the project will be registered as an offset project.

Monitoring, Verification and Certification

Monitoring, data quality assurance, quality control, and record keeping requirements for offset projects will be specified in the quantification protocol for each project type. Offset credits generated must be verified by an accredited third-party verifier. Environment Canada will certify the issuance of offset credits from an offset project by issuing a certification report and depositing the designated number of offset credits in project proponent’s account in the tracking system once all certification conditions have been met.

Registries and Fees

The offset credits will be managed by an online tracking system that is currently under development. The Offset System is expected to operate on a cost-recovery basis. Fees may be charged for registration and certification, and to cover the cost of operating the unit tracking system. Fees will not be charged at the outset of the program to facilitate a quicker start to the Offset System. The fee structure is currently under development.

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