Federal Government Launches Canada’s Greenhouse Gas Offset System: What You Need to Know | Denton

On June 8, 2022, the federal government launched Canada’s Greenhouse Gas Offset System (credit system) in order to meet Canada’s emission reduction targets.1 The credit system creates market-based incentives for municipalities, Indigenous communities, industry players and individuals to implement innovative solutions to reduce greenhouse gases (GHG) and remove GHGs from the atmosphere.

The credit system is governed by the Canada’s Greenhouse Gas Offset Regime RegulationsSOR/2022-111 (Regulations), created under the Greenhouse Gas Pollution Pricing ActSC 2018, c 12 (GGPPA).2 The credit system was designed and created in alignment with the Pan-Canadian Greenhouse Gas Offset Frameworkwhich incorporates the experience and expertise of Alberta, British Columbia and Quebec, which have already launched their own offset system.3

Currently, only provinces that do not already have a carbon pricing system that meets or exceeds federal requirements are subject to the GGPPA and credit system. For example, in Alberta, TIER law and regulations govern instead. Under the Regulations, participants in the credit system must be registered and follow a federal protocol defining how GHG emission reductions or GHG removals from the atmosphere are measured. These reductions and removals must also come from activities that are not otherwise required by law or fall under an existing carbon pricing system. The offset credits generated are tradable and sellable on the market.

The first federal protocol that allows for the generation of offset credits is the new Protocol for the Recovery and Destruction of Methane from Landfills.4 Under it, landfill operators who recover landfill gas and subsequently destroy or use it are eligible to receive offset credits. Additional protocols applicable to the refrigeration, agriculture and forestry sectors are currently being developed. A protocol for direct airborne carbon capture and sequestration technologies will also emerge in the near future.

The minimum price for offset credits in Canada, and therefore for carbon emissions, is dictated by the Pan-Canadian Approach to Pricing Carbon Pollution (Federal landmark), last updated August 2021.5 The Federal Benchmark sets the price for the offset credit at C$65 per ton of eq. CO2 in 2023 and will increase by CA$15 per year to CA$170 per tonne CO2 eq. CO2 in 2030, when it will be updated again. Purchased credits can be used to meet compliance obligations under the federal results-based pricing system.

With these initiatives, the federal government hopes to stimulate private sector investment in technologies and projects that promote decarbonization, and incentivize existing facilities to improve their carbon footprint.

Special thanks to summer law student Jack Yuan who helped prepare this overview.

  1. See https://www.canada.ca/en/environment-climate-change/news/2022/06/canada-launches-greenhouse-gas-offset-credit-system-to-support-a-clean-green-economy. html.
  2. See https://gazette.gc.ca/rp-pr/p2/2022/2022-06-08/html/sor-dors111-eng.html.
  3. See https://ccme.ca/en/res/pan-canadianghgoffsetsframeworken1.0secured.pdf.
  4. See https://www.canada.ca/en/environment-climate-change/services/climate-change/pricing-pollution-how-it-will-work/output-based-pricing-system/gas- a-effect-de-serre-federal-offset-system/compendium-protocols/landfill-methane-recovery-destruction.html.
  5. See https://www.canada.ca/en/environment-climate-change/services/climate-change/pollution-pricing-how-it-will-work/carbon-pollution-pricing-federal-benchmark-information/federal-benchmark- 2023-2030.html.

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