Federal Greenhouse Gas Offset System

Summary#

The federal government published a proposal called the Greenhouse Gas Offset Credit System Regulations (Canada) under the Greenhouse Gas Pollution Pricing Act. If adopted, the rules would create a voluntary federal offset program that lets eligible projects generate tradeable federal offset credits that can be sold or used by industrial facilities in the federal output‑based pricing system. The notice was published on March 6, 2021 and invited comments for 60 days.

What it does#

• Establishes a voluntary federal greenhouse‑gas offset system and a public credit‑tracking system.
• Sets rules for registering offset projects, including required information about the project, its baseline, and measures to manage reversal risks.
• Requires third‑party verification by accredited verifiers (accreditation bodies named include the Standards Council of Canada and the ANSI National Accreditation Board (ANAB)).
• Gives the Minister authority to publish and require project methods called federal offset protocols (protocols set quantification, leakage, monitoring and risk rules).
• Limits who and what can generate credits:
  • Projects must be in a single province or territory and the proponent must be based in Canada.
  • Projects must be voluntary (not required by law) and not already credited in another program.
  • Registration timing rules include approvals within 18 months of a protocol or project start; special transitional rules allow projects starting on or after January 1, 2017 to register if done by December 31, 2023. After 2024, projects may only start up to 5 years before registration.
• Sets crediting periods and extension limits:
  • Forestry projects: up to 30 years (can be extended, biological projects cap at 100 years total).
  • Other biological sequestration: up to 20 years.
  • Other project types: up to 8 years (can be extended up to two times).
• Creates an environmental integrity account as a buffer. The Minister deposits 3% of issued credits for most project types; biological projects receive 3% plus a risk‑based percentage. Those credits cannot be sold and can be used to replace credits lost to involuntary reversals or other shortfalls.
• Connects to the federal Output‑Based Pricing System (the Output‑Based Pricing System Regulations (OBPSR)) by making federal offset credits an authorized compliance option for covered facilities.
• Estimates federal implementation costs of up to $800,000 per year over 2021–2030.

Who's affected#

• Project developers and landowners who might run offset projects (likely in agriculture, forestry, waste management, and refrigeration/industrial refrigerants).
• Industrial facilities covered by the federal OBPS that may buy offset credits to meet their compliance obligations.
• Provincial and territorial governments with existing offset systems (the federal protocols do not apply in jurisdictions that have an active provincial protocol for the same project type).
• Verification companies and accreditation bodies asked to vet project reports.
• Indigenous communities and organizations that might host or develop land‑based projects; the government says it plans Indigenous engagement and capacity support.
• Small businesses could participate voluntarily as project proponents, but participation is optional and involves upfront and monitoring costs.

Why it matters#

• Creates a new, federally recognized way for voluntary projects to earn income by selling offset credits. That can make some climate and land‑management projects financially viable.
• Gives covered industrial facilities another compliance option besides paying excess emissions charges or doing on‑site reductions. That can lower their compliance costs, depending on credit prices.
• Puts responsibility for credit validity on sellers (project proponents). Buyers are protected from replacing invalid credits, while sellers must replace invalid credits or face revocation.
• Includes rules and a buffer account to try to protect environmental integrity, but the overall net effect on Canada’s emissions depends on how many projects start, how protocols are written, and how well monitoring and verification work. The proposal does not itself guarantee net emissions reductions.
• This is a proposed regulation (not law yet). The public comment period followed the March 6, 2021 publication and submissions were invited for 60 days; final text and the date it would come into force were not set in the notice.