On August 9, 2008, John Baird, the Federal Minister of the Environment, unveiled the draft Canada’s Offset System for Greenhouse Gases: Guide for Protocol Developers ("the Guide"). There will be a 60-day comment period for the draft Guide. This Guide is the first of three that will be issued for the offset credit system under the Federal climate change plan, Turning the Corner Action Plan, itself published on April 26, 2007, to help in reducing Canada’s emissions intensity by 20% from 2006 levels by 2020.

Canada’s Regulatory Framework for Industrial Greenhouse Gases

Under the Turning the Corner Action Plan, Parliament issued the Regulatory Framework for Industrial Greenhouse Gas Emissions on March 10, 2008, which includes the offset system, carbon trading, a technology fund, and a credit for early action program.

The Credit for Early Action Program is already underway. The deadline for submitting the Notice of Interest was July 2008, and the submission of Phase I templates is required by September 5, 2008.

The Regulatory Framework is to be finalized in late 2009, and will come into force January 1, 2010.

Offset Credit System in Canada

Canada's Offset System for Greenhouse Gases: Guide for Protocol Developers provides detailed information for potential developers on the preparation and completion of an Offset System Quantification Protocol ("OSQP"). An OSQP outlines the method used for identification and measurement of greenhouse gas reductions from eligible projects under Canada’s Offset System. This Guide will be a component of the rules establishing Canada’s Offset System for Greenhouse Gases, pursuant to section 322 of the Canadian Environmental Protection Act, 1999.

Under Canada’s Offset System for Greenhouse Gases, credits will be issued for incremental, real, and verified domestic reductions or removals of greenhouse gas emissions from activities that are not regulated under the Regulatory Framework for Industrial Greenhouse Gas Emissions. These credits can then can be transferred to regulated entities for compliance purposes.

According to the Regulatory Framework for Industrial Greenhouse Gas Emissions, the Federal Government will bear all the initial delivery costs for Canada’s Offset System, and no user fees will be collected for approximately 18 months to two years. As well, the Government will also establish a credit tracking system to monitor credits from their issuance to their retirement by use or cancellation for the good of the environment.

The credit creation process is as follows:

  1. Protocol Developer creates a quantification protocol for the project type, and Environment Canada approves the protocol;
  2. Project Proponent applies to have their project registered;
  3. Environment Canada registers the project;
  4. Project Proponent reports the greenhouse gas reductions achieved from a registered project and ensures that a verifier has provided a reasonable level of assurance on the reductions claim; and
  5. Environment Canada certifies the reductions and issues offset credits.

There are several external protocols eligible for the Fast Track Process, as outlined in Annex J of the Guide. In order to participate in the Fast Track Process, submissions of external protocols must be made no later than four weeks from the publication of the final version of the Guide, and can be submitted to Environment Canada throughout the 60-day comment period by filling out the Base Protocol Plan form in Annex A of the Guide. The following rules apply:

  1. The external protocols must be a complete document that has been approved for use by the Kyoto Protocol’s Clean Development Mechanism, Alberta’s Specified Gas Emitters Regulation, the California Climate Action Registry, New South Wales’ Greenhouse Gas Abatement Scheme, France’s Offset System, or the Regional Greenhouse Gas Initiative;
  2. If there is more than one protocol for the same project type, the protocol submitted must be the one that most closely meets the requirements of the ISO 14064-2 standard and can most easily be adapted for use in Canada’s Offset System;
  3. The protocol must be for projects that could occur in Canada without illegality; and
  4. The protocol must be for projects that will not be regulated under the Regulatory Framework for Industrial Greenhouse Gas Emissions.

The eligible protocols for the Fast Track Process include the following project types: agriculture (livestock feeding and manure, and soils), energy efficiency, forestry, fossil fuel-based energy, geological sequestration, methane management, renewable energy, transportation and waste management among others.

The Workplan for Canada’s Offset System will be posted for consultation in early 2009, following the completion of the Fast Track Process. From that point onwards, new project types are expected to be considered every one to two months.

Guidance documents for Project Proponents and Verification Bodies are expected shortly.

Any person may, within 60 days after publication of the draft Guide, file with the Minister of Environment written comments on the proposed document.