Offset System presents wide-ranging opportunity for revenue generation
Canada's carbon Offset System is scheduled to begin in January. Despite the arcane name, this program offers a new revenue opportunity for almost every kind of business and non-profit organization.
Offsets are popularly known as carbon credits, an essential component of Canada's plan to reduce total greenhouse gas (GHG) emissions. Under the Offset System, organizations that reduce GHG emissions through energy efficiency, industrial process change, capture of carbon, or reduction/elimination of activities that emit carbon dioxide (CO2), methane, or other greenhouse gases, will be able to register those projects and create carbon credits. They can then sell these credits on the open market or to government.
To give an approximate idea of the size of the business opportunity, one tonne of greenhouse gas credits can be created by reducing electricity use by roughly 1,000 kilowatt-hours, fuel oil or diesel fuel use by 350 litres, gasoline use by 430 litres, or natural gas use by 530 cubic metres. More exact numbers will be published in protocols or may be derived through approved methodologies.
Credits can be generated by reducing fuel and energy use, by reducing emissions, for example of CO2 from industrial processes or methane from landfills or livestock, and by capturing carbon, for example in forestry or soils. Credits can be created only through discrete projects that exceed business-as-usual activities. Projects may be within an organization's own operations or externally, in partnership with others.
One area of uncertainty is the value of credits. The range for Canadian markets is essentially $1 to $15 per tonne, with the upper limit being the result of a government cap. The first of the registered carbon credit sales are likely to be at the lower end of this range, but a steady increase towards the $15 figure is expected over the next seven years.
Initially, credits will assist the economic viability of projects, such as energy saving projects, which are already close to having a positive return on investment. As the value of credits increases they will provide an economic foundation for a steadily growing number of projects.
The draft rules are complex but government has promised to simplify them as much as possible. A cadre of experts will soon emerge to help organizations implement offset projects in an efficient manner. Trained verifiers will also be available in every part of Canada to provide the required independent verification.
The most successful businesses are likely to be those that take advantage of the carbon revenue opportunity. It is not too soon to start identifying and implementing carbon offset projects: all projects implemented since 2000 will qualify, and there will be a simplified approvals track for small projects.
As credits will accrue on an annual basis, the sooner projects are started the more revenue they will generate.
More information is available in the Government of Canada Offset System for Greenhouse Gases - Technical Background Document, which may be downloaded from www.climatechange.gc.ca/english/publications/offset_gg_tech/.