Ottawa, Canada - The federal government’s long-awaited draft rules for a carbon emissions trading system were released last week by Environment Minister, John Baird. It is the first of three guides that will lead to creation this fall of Canada’s Offset System for Greenhouse Gases.

"Part of our Government’s approach to cutting greenhouse gases is to find new and innovative ways to rise to this important challenge," said the Minister. "Canada’s Offset System is a key component of our Turning the Corner Action Plan to help reduce Canada’s emissions an absolute 20% by 2020."

The document released - Canada’s Offset System for Greenhouse Gases: Guide for Protocol Developers - provides detailed information on how to prepare and complete an Offset System Quantification Protocol to identify and measure greenhouse gas reductions from eligible projects under Canada’s Offset System.

The Offset System is one component of federal government’s climate plan, which includes carbon trading, credit for early action, and a technology fund. The Offset System provides businesses with the option of using credits to meet mandatory greenhouse gas emission reduction targets.

The government’s plan requires big industry to take action to cut its greenhouse gas emissions. In addition, the plan has measures requiring new oil sands projects to implement technologies for carbon capture and storage. Eventually it will also ban the construction of dirty coal-fired power plants.

The Offset System

Canada’s Offset System will issue credits for greenhouse gas emission reductions from activities that are not subject to mandatory targets under the Turning the Corner plan. Industrial producers will be able to acquire these credits and use them to meet their mandatory greenhouse gas reduction obligations. Other parties (e.g. small businesses, individuals, travellers) will also be able to acquire and use these credits to voluntarily offset the greenhouse gas emissions from their activities. The credits will help fund projects that could include methane capture and destruction from landfill gas, reforestation and other forestry projects, soil management, and clean electricity generation such as wind or solar projects.

The new guide provides detailed information on how to prepare and complete an Offset System Quantification Protocol. This protocol describes the approach to identify and measure greenhouse gas reductions and eligible projects under Canada’s Offset System.

In addition to using offset credits, companies can pursue a variety of other compliance options, including reducing emissions within their organizations, making contributions to a technology fund, trading for credits with regulated firms that emit less than their regulatory target, earning credit for early action, and accessing the United Nations’ Clean Development Mechanism.

Guidelines in Brief

• Canada’s Offset System for GHGs will issue credits for incremental, real and verifiable domestic reductions in offset activities that are outside the proposed industrial air emissions regulations. It is proposed that the credits that are issued may be used for compliance inside the proposed industrial air emissions regulations and these transactions will form the basis of the carbon trading system in Canada.
  
  
• A specific action / project must take place within Canada and achieve GHG reductions that have been verified by a third party.
  
  • Projects must have started on or after January 1, 2000.
  • Credits may be issued for reductions achieved after January 1, 2008.
  • Reductions achieved must go beyond the baseline defined for the project type.
  • Reductions are surplus to all legal requirements (federal, provincial/territorial and regional)
  • Reductions are beyond what is expected from receipt of other climate change incentives (federal, provincial/territorial)
    
    
• The standard protocol development process to create a legitimate offset is expected to take five to eight months although the proposals appear to be cumbersome (see Figure 1 of Section 1.3). Protocols will be developed with Environment Canada, protocol developers and technical review experts.
  
  
• Environment Canada has added a "Fast Track process" to accelerate access to offsets starting will consider applications to adapt quantification protocols that are already approved by another offsets program such as the Clean Development Mechanism, Alberta’s Specified Gas Emitters Regulation, the California Climate Action Registry, the Greenhouse Gas Abatement Scheme in New South Wales, France’s Offset System, or the Regional Greenhouse Gas Initiative.
  
  
• The list of 30 acceptable protocols is detailed in Annex J and includes energy efficiency for buildings (waste heat recovery), forestry, carbon based energy (industrial fuel switching, AGR, EOR, landfill gas capture, coal bed and other methane), renewable energy (solar, wind, biomass, run of the river), transportation and waste management. Other protocols may be added to the list.
  

Two other guidance documents will be published later in the summer: the Guide for Project Proponents and the Guide for Verification Bodies. Each of these documents will first be published in the Canada Gazette, Part I for a 60-day public consultation. It is anticipated that revisions may be made and the final guidance documents published in the fall.

Proposed greenhouse gas regulations are expected to be published for public consultation in the Canada Gazette later this year, and the regulations finalized in 2009 to come into force as planned on January 1, 2010.

The Turning the Corner Plan seeks to regulate industrial greenhouse gas emissions to help achieve the Government of Canada’s commitment to a 20% reduction in Canada’s overall emissions from 2006 levels by 2020. Under this plan, some of Canada’s biggest polluters will be required to reduce emissions for every unit of production by 18% by 2010, and by an additional 2% every year after, drawing from a range of options, including the offset system.

Readers wishing to comment on the consultation draft, have 60 days (until October 8, 2008) to provide written comments to Lisa Minotti, Head, Quantification, 351 Saint-Joseph Boulevard, 17th Floor, Gatineau, Quebec K1A 0H3, 819-956-6686 (telephone), 819-956-5162 (fax), os_scc_consultations@ec.gc.ca (email).

Your submission must reference Offset System for GHG - Guide for Protocol Developers; Canada Gazette, Part I and the August 9, 2008 release date. After reviewing the comments received and making any necessary revisions, the final Guide for Protocol Developers will be published in the Canada Gazette, Part I, and will be distributed through Library and Archives Canada.

Persons wishing to develop an external protocol, they must fill out a Base Protocol Plan form in Annex A of the Guide and submit it to the address provided above within four weeks of the publication of the final version of the Guide for Protocol Developers in the Canada Gazette, Part I. Submissions will also be accepted throughout the 60-day comment period for this Guide.

For more information on the Offset System, click here

Click here for the full Guide for Protocol Developers

The full 105 page PDF Version can be found here

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For More Information: Environment Canada