Federal GHG Offset Credit System

Summary#

The Canadian Greenhouse Gas Offset Credit System Regulations (SOR/2022-111) create a federal system for issuing offset credits to projects that prevent or remove greenhouse gases. They set rules for who can register projects, how credits are measured and checked, and what happens if credits are wrong or a stored carbon is released; the regulations came into force when registered on May 20, 2022.

What it does#

• Sets up a federal offset credit program under the Greenhouse Gas Pollution Pricing Act so the Minister of the Environment can issue credits for verified greenhouse‑gas (GHG) reductions.
• Says projects must produce reductions that are real, additional, quantified, verified, unique and permanent. Projects that started before January 1, 2017 are not eligible.
• Lays out how long a project can generate credits (unless a protocol says otherwise):
  • sequestration related to forestry: 30 years
  • other sequestration: 20 years
  • other project types: 10 years
• Allows three ways to count carbon removals for sequestration projects, if the protocol permits:
  • tonne‑tonne (credits for tonnes stored; long-term monitoring),
  • tonne‑year (counts climate benefit over reporting periods),
  • hybrid tonne‑year (combines the two approaches).
• Requires registration information, proof of entitlement to credits, and that projects not be registered under another offset program or paid for twice.
• Sets reporting, verification and monitoring rules:
  • initial report: within 6 months after the first 12 months of a crediting period;
  • later reports: no later than 6 years after the prior report for sequestration projects, and no later than 3 years for other projects;
  • verification must be done by a body accredited to ISO Standard 14065 and follow ISO Standard 14064‑3;
  • for tonne‑tonne projects, monitoring continues for 100 years after the last crediting period (site visits and periodic verification).
• Creates an environmental integrity account. A share of issued credits (baseline 3%, plus extra percent for some sequestration projects) is placed there as an “insurance” pool to cover involuntary losses or replacements.
• Explains consequences and remedies for errors, over‑ or under‑issuance of credits, reversals (carbon losses), suspension and cancellation of registrations.
• Adds designated violations to the Environmental Violations Administrative Monetary Penalties Regulations so enforcement officers can issue penalties.

Who's affected#

• Project proponents: landowners, farmers, forest managers, landfill operators, companies that retrofit refrigeration or change livestock feed — anyone who wants to run a qualifying offset project under a federal protocol.
• Buyers of credits: industrial facilities covered by the federal output‑based pricing system (OBPS) and other organizations or governments that want to buy credits for compliance or voluntary goals.
• Verification and accreditation bodies: third parties that must meet ISO accreditation and competency rules to verify reports.
• Provinces and territorial offset programs: federal protocols won’t apply where a provincial protocol already covers the same activity (there are timing rules for switching).
• Indigenous communities and the public: projects on or near Indigenous lands, and communities in project areas, may be affected by project design, safeguards and consultation; the Regulations require reporting on environmental and social safeguards in project reports.

Why it matters#

• It creates a new, regulated way for projects to earn money by cutting or removing GHGs, which can encourage activities that aren’t covered by existing carbon pricing.
• Covered industrial facilities gain another compliance option (buying federal offset credits) that can lower their costs compared with paying excess‑emission charges.
• The rules include long-term permanence and verification steps (including possible 100‑year monitoring for some methods) and an environmental integrity account to reduce the risk that issued credits do not represent real, lasting climate benefits.
• The Regulations balance flexibility and environmental safeguards (different accounting methods, reporting schedules, and verification standards) — but they also create long‑term obligations and record‑keeping that proponents need to plan for.