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On Wednesday, Canada launched its Greenhouse Gas Offset Credit System (GGOCS) to regulate the sale of carbon offsets under the national carbon pricing law. The program will allow registered parties to generate and sell verified carbon offset credits issued by Canada’s federal environmental agency, Environment and Climate Change Canada (ECCC).
GGOCS credits will be issued to registered parties who engage in carbon reduction projects in accordance with ECCC “protocol” offset regulations. For each tonne of carbon reduced in accordance with applicable protocol regulations, ECCC will issue one offset credit.
Credits can be purchased and applied by businesses subject to the federal Output-Based Pricing System (OBPS) - a cap and trade program for large industrial emitters - against their total accounted emissions to satisfy compliance obligations (i.e., to stay below their applicable emission cap). Companies and other interested parties can also purchase GGOCS credits to meet voluntary emission reduction targets (e.g., net-zero goals).
At least 3% of all project offset credits issued will be deposited in an “environmental integrity account” run by ECCC. The account will serve as a form of insurance for cases of “involuntary reversal”, wherein a project fails to reduce or sequester emissions as expected, to ensure the system reduces real emissions as intended.
The federal offset credit framework rules were set out in 2018’s Greenhouse Gas Pollution Pricing Act, though a functional federal carbon offset system would have to wait for ECCC to write applicable regulations.
Last year, ECCC proposed several draft protocol rules for eligible projects falling into four different categories:
advanced refrigeration systems;
forest management;
landfill methane management; and
“enhanced soil organic carbon” (regenerative agriculture).
The GGOCS offset regulations published in the Canada Gazette this week state that prioritized protocol project types include the four aforementioned protocols as well as livestock feed management. At this time, however, only landfill methane management activities, in which waste methane is captured and destroyed with the use of certain technologies, are eligible for GGOCS credit issuance.
The federal GGOCS is the fourth regulated carbon offset program in Canada. Alberta, British Columbia, and Quebec all operate their own offset programs under their respective provincial carbon pricing systems.
Provided provincially-issued offset credits meet federal benchmarks, they can also be used for OBPS compliance purposes.
To learn more about carbon pricing and carbon offsets in Canada, see our recent reports Carbon Pricing: A Practical Guide for Canadian Businesses and Institutions and Carbon Offsets: A Practical Guide for Canadian Businesses.
Please contact our firm at 647-725-4308 or info@greeneconomylaw.com for legal assistance in connection with carbon offset activities.