August 29, 2005

Ottawa details plan for domestic GHG offset credit system

The federal government has released for comment consultation documents for a domestic offset credit system designed to reward innovation and encourage domestic reduction or elimination of greenhouse gas (GHG) emissions. Through the offset system, businesses, organizations and individuals will be able to earn offset credits when they carry out projects that result in incremental emission reductions or removals, beyond what would have been achieved under "business as usual" conditions.

The Offset System for Greenhouse Gases Overview Paper explains the general policy context and the proposed principles and rules to guide the system, while the accompanying Technical Background Document sets out a detailed proposal for implementing the rules. Both may be viewed on-line at www.climatechange.gc.ca. Following consultations with provinces, territories, industry and Aboriginal groups, the government expects to have the system in operation early next year. Written comments will be accepted until September 30, 2005.

The proposed system will encourage innovative Canadian projects that use new practices and technologies to reduce greenhouse gas emissions. Examples include:

* property developers who include renewable energy elements in their plans for new subdivisions;

* farmers who adopt low- or zero-till practices;

* forestry companies that engage in state-of-the-art forest management practices;

* businesses that develop innovative ways to reduce emissions through recycling and energy efficiency;

* municipalities that invest in alternative transportation modes or capture landfill gas to generate electricity; and

* companies that implement programs encouraging their employees to use public transit or tele-commute.

Companies, governments, organizations or citizens undertaking such projects-provided they meet the criteria to be finalized following consultations-will be awarded credits. In turn, these credits may be sold to:

* Canadian companies in the Large Final Emitters category to put towards their emission reduction targets;

* the Climate Fund, a new institution established to purchase credits on behalf of the federal government; or

* another interested individual or organization.

As proposed, GHG reductions or removals from a registered offset project would have to meet several criteria in order to qualify for credits. They must be: quantifiable; real (i.e. resulting from a specific action, not just a shift of emissions from one site or source to another); surplus (i.e. not resulting from a particular federal GHG regulation, program or incentive); verifiable; and unique (i.e. used only once to create an offset credit). Other rules address coverage of the offset system; start date of projects; achievement of reductions or removals within the project registration period; and ownership of the GHG reductions or removals achieved through a project.

The system comprises four stages in the creation of offset credits, beginning with the application to register a GHG reduction or removal activity as an offset project. The second step is to confirm that the requirements for an offset project are met, which will complete the registration of the project. The third stage involves verifying the emission reductions or removals achieved by the project, and the fourth and final stage is the issuance of the corresponding number of offset credits.

As part of a process to simplify the project approval stage, the government plans to use offset system quantification protocols, i.e. protocols that are pre-approved for use by project proponents. These will be based on work done in this area by the International Organization for Standardization (ISO) and the World Resources Institute-World Business Council on Sustainable Development. Activities for which quantification protocols are currently under development include landfill gas capture and destruction; reductions in methane emissions from agricultural activities; soil management; and afforestation. Activities for which the development of quantification protocols is now being initiated include intermodal transportation; biofuels; geological sequestration; non-emitting energy; and energy efficiency.

Written comments should be directed to Judith Hull, project manager, offsets, Environment Canada, Suite 200, 155 Queen Street, Ottawa K1A 0H3, E-mail offsets-compensations @ ec.gc.ca.

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