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Canada’s department of the environment and climate change recently announced it is developing first phase federal carbon offset protocols for advanced refrigeration systems, forest management, landfill methane management, and “enhanced soil organic carbon” (presumably referring to what is commonly known as regenerative agriculture). These protocols, promulgated pursuant to s. 195 of the Greenhouse Gas Pollution Pricing Act, will regulate the use of carbon offsets under the federal output-based pricing system (OBPS). 

The OBPS is a cap and trade-type program primarily for large industrial polluters. It is a major component of Canada’s federal carbon pricing system, along with the more straightforward fuel charge. It applies as a ‘backstop’ in those provinces lacking a sufficient provincial carbon pricing program for industrial polluters. 

(You can read more about the OBPS and Ontario’s industrial pollution pricing system here.)

In the announcement, the federal government stated it will also be considering additional project types for future protocol development. According to premiere Canadian energy law firm Stikeman Elliott, indicated future project types include aerobic composting and digestion, afforestation/reforestation, avoided forest and grassland conversion, livestock feed and manure management, and reduced emissions from agriculture fertilizers.

Interest in carbon offsetting has grown considerably in recent years, though the issue remains controversial. Some authorities believe offsets are essential to achieving the emission reduction goals of the Paris Agreement. Conversely, many environmentalists view offsets as mere greenwashing cover for entities avoiding the tough work of actual emission reduction. This perspective is supported by offsets’ weak and problematic track record.

Ultimately, the correct view may depend on how effectively offset programs can and will be regulated in Canada and other jurisdictions.