Proposed Federal Offset Rules

To be eligible to generate offset credits, under the proposed federal offset system, projects must achieve real, incremental, quantified, verified and unique reductions of greenhouse gases (GHG) occurring within Canada. The proposed process is as follows:

  • a protocol developer creates a quantification protocol for the project type and Environment Canada approves the protocol;
  • a project proponent applies to Environment Canada to have its project registered;
  • the proponent reports the GHG reductions from the registered project and ensures a verifier provides assurance of the reduction claims;
  • Environment Canada certifies the reductions and issues offset credits, with each credit representing one tonne of carbon dioxide equivalent;
  • offset credits are tradable and bankable within the unit tracking system.

One example of how the system might work involves a farmer who has switched to no-till farming, which helps store carbon dioxide in the soil. The farmer applies to have the no-till farming accepted as an offset project, using an approved quantification protocol for no-till farming. (In some cases, an aggregator can combine and submit a collection of small no-till projects as a single registered project.) Once the project is approved and registered, the farmer can begin quantifying the removal of GHGs achieved by the no-till project, having the results verified by an independent third party and applying for offset credits. Once issued, these credits can be sold to regulated companies, like a coal-fired electricity generator, that are required to reduce their emissions.

The federal proposal for an offset system differs from that of Alberta.  The federal government will have a mandatory application and approval step for projects, and at the end, will certify and issue the offset credits back to the project developer or aggregator.  This creates a carbon currency for the market.  The Alberta system does not include these steps.  The rights to the ‘verified emission offsets' are sold to a buyer and the paperwork submitted to Alberta Environment for use in compliance reports.