Canada Gazette, Part I, Volume 155, Number 10: Greenhouse Gas Offset Credit System Regulations (Canada)

March 6, 2021

Statutory authority

Greenhouse Gas Pollution Pricing Act

Sponsoring department

Department of the Environment

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

Greenhouse gas (GHG) emissions are primary contributors to climate change. A number of measures to reduce domestic GHG emissions have recently been implemented, including the federal carbon pollution pricing backstop system, in order to help Canada exceed its current GHG emissions reduction target under the Paris Agreement and achieve its goal of net-zero GHG emissions by 2050. However, carbon pollution pricing measures do not cover all sources of GHG emissions in Canada.

The Greenhouse Gas Pollution Pricing Act (GGPPA or the Act) received royal assent on June 21, 2018.footnote 1 The Act provides the legal framework and enabling authorities for the federal carbon pollution pricing backstop system in Canada. This system consists of two parts: a regulatory charge on fossil fuels (the fuel charge) and an output-based pricing system (OBPS) for industrial facilities that is enabled by means of the Output-Based Pricing System Regulations (OBPSR). In general, facilities in the federal OBPS do not pay the fuel charge on fuels that they purchase but instead are required to provide compensation on an annual basis for any GHG emissions exceeding their respective emissions limit during a compliance period. Federal offset credits are one of three types of compliance units specified under the GGPPA that facilities in the OBPS may provide as compensation for excess emissions.

The potential to generate federal offset credits could incentivize activities leading to reductions in GHG emissions or increases in GHG removals from the atmosphere by carbon sinks (referred to collectively as “GHG reductions”) that are not required under existing regulations or covered by other measures related to carbon pollution pricing.footnote 2 Under the GGPPA, regulations are necessary to create a federal GHG offset credit system and authorize the Minister of the Environment (the Minister) to issue offset credits. Without such regulations, offset project proponents are not able to generate federal offset credits and earn revenue by selling them. Without the ability to generate and sell credits, project proponents may not have a sufficient economic incentive to carry out additional voluntary activities that could result in GHG reductions. In addition, in the absence of regulations that would establish an offset credit system to enable the issuance of federal offset credits, facilities in the federal OBPS would have fewer options to meet their compensation obligations under the OBPSR.

Background

The Government of Canada has committed to taking action on climate change and is working in partnership with the international community. At the United Nations Framework Convention on Climate Change (UNFCCC) conference in December 2015, the international community, including Canada, adopted the Paris Agreement, an accord intended to reduce global GHG emissions to limit the rise in global average temperature to less than two degrees Celsius (2 °C) above pre-industrial levels and to aim to limit the temperature increase to 1.5 °C. As part of its commitments made under the Paris Agreement, Canada pledged to reduce national GHG emissions by 30% below 2005 levels by 2030. The Government of Canada is implementing a series of measures to meet and exceed this objective, including continuing to put a price on carbon pollution, and in December 2020 it published a plan called A Healthy Environment and a Healthy Economy for Canada to achieve net-zero GHG emissions by 2050.footnote 3

Federal GHG offset credit system

The Department of the Environment (the Department) is developing a federal GHG offset credit system as part of the Government of Canada's carbon pollution pricing system under the GGPPA in order to support Canada's actions to reduce GHG emissions. This system would consist of three main elements:

The development of federal offset protocols would occur separately from the regulatory development process. The Department has identified and prioritized the four project types described below for its initial protocol development, which it plans to begin in early 2021:

Each federal offset protocol would define, or provide the methods for determining, a baseline for project activities, as well as the methods for quantifying GHG reductions that would be considered incremental to this baseline. The project baseline is the business-as-usual scenario against which project activities must be measured and from which federal offset credits could be generated. A project activity must reduce or remove GHGs in relation to the project baseline for it to generate GHG reductions that would be considered incremental to the baseline. Each protocol would also contain requirements related to project planning and implementation activities, including monitoring, reporting, and risk assessment and management. The Government of Canada's Federal GHG Offset System webpage would present interested parties with the status of protocols and inform them of public comment opportunities.

Output-Based Pricing System Regulations (OBPSR)

The OBPSR took effect on January 1, 2019, except in Yukon and Nunavut, where they took effect on July 1, 2019. These Regulations are administered by the Department. They define the facilities to which the federal OBPS applies (“covered facilities”) and specify emissions-intensity (or emissions per unit of output) standards, referred to as output-based standards, for certain industrial activities.footnote 4 The federal OBPS applies in the “backstop” jurisdictions listed in Part 2 of Schedule 1 to the GGPPA.footnote 1

The federal OBPS covers facilities carrying out certain industrial activities in these jurisdictions that emit at least 50 kilotonnes (kt) of GHG emissions per year. Also, any other facility located in a backstop jurisdiction, operating in an industrial sector considered at risk of competitiveness impacts from carbon pollution pricing, and emitting at least 10 kt of GHG emissions per year may apply to opt into the federal OBPS.

A covered facility with GHG emissions below its emissions limit receives surplus credits issued by the Minister for those emissions below the facility's annual limit. Each surplus credit represents one tonne of carbon dioxide equivalent (CO2e). These credits may be used as compliance units or sold to other facilities in the OBPS. When the GHG emissions of a covered facility exceed its emissions limit, the facility is required to provide compensation for its excess emissions by the prescribed deadline. A covered facility has options with respect to how it chooses to provide compensation for excess emissions. First, it can pay the excess emissions charge.footnote 5 Second, it can use compliance units, which are (i) surplus credits that it has earned or purchased from another covered facility; (ii) provincial or territorial offset credits formally recognized by the Minister under the OBPSR as compliance units; and (iii) federal offset credits.

Objective

The objective of the proposed Greenhouse Gas Offset Credit System Regulations (Canada) [the proposed Regulations] is to further extend the carbon pollution price signal by implementing a federal GHG offset credit system (a federal offset system) and incentivizing activities that lead to GHG reductions that are not required under existing regulations or covered by other measures related to carbon pollution pricing. The proposed Regulations would broaden the reach of the federal carbon pollution price signal that is set out in the Act by allowing the Minister to issue federal offset credits to project proponents for GHG reductions from projects that meet eligibility criteria and that are implemented in accordance with federal offset protocols.

Description

The proposed Regulations would be made under section 195 of the GGPPA and establish requirements for the operational aspects of a federal GHG offset credit system to be administered by the Department. Participation in the offset credit system is voluntary. In order to generate offset credits under the proposed Regulations, a project would have to satisfy eligibility criteria, and be implemented by a project proponent in accordance with a federal offset protocol. Project proponents would be required to submit project reports verified by an accredited third-party verification body prior to the issuance of any offset credits. They would also have to open an account in the credit and tracking system that the Department is establishing under the GGPPA.

Registration application requirements

The proposed Regulations stipulate the information that a project proponent must provide when registering an offset project, or when transferring the registration of a project to another project proponent. Key information to be provided in registration applications includes

The proposed Regulations also stipulate when the Minister may cancel the registration of a project in the federal offset system, including

Project eligibility criteria

In order to be registered in the federal offset system, projects would have to satisfy eligibility criteria to ensure that the projects achieve real, additional, quantified, verified, unique and permanent GHG reductions. An offset project would be required to meet the following eligibility criteria:

In addition, a project would only be eligible for registration in the federal offset system if the project proponent is able to demonstrate exclusive entitlement to, or ownership of, all GHG reductions resulting from the project. This means that a project proponent receiving a direct financial incentive from a funding program would be eligible to register the project in the federal offset system if the funding agreement does not restrict the project proponent from claiming exclusive ownership of the GHG reductions generated. Project proponents would be required to provide information concerning direct financial incentives as part of project registration and ongoing reporting obligations. If a direct financial incentive is received for an offset project under the proposed Regulations after its registration, the project proponent must be able to continue to demonstrate exclusive ownership of the GHG reductions resulting from the project, in order to be issued federal offset credits.

Crediting and reporting

The proposed Regulations specify the length of the periods during which offset projects are eligible to generate credits, as well as the number of times that these crediting periods may be extended. In general, the crediting period is set at 30 years for forestry projects, 20 years for other biological sequestration projects, and 8 years for all other project types. Crediting periods for biological sequestration projects may be extended up to a maximum period of 100 years, while crediting periods for all other project types may be extended up to two times, provided that all regulatory requirements continue to be met.

The proposed Regulations also set out requirements for reporting, monitoring, record-keeping and verification. In terms of reporting, they establish the frequency and content for reports that project proponents must submit to be eligible for issuance of federal offset credits. Project proponents would be obligated to submit an initial project report to the Department no more than six months after the first year of the crediting period, and at least once every six years thereafter for biological sequestration projects, or at least once every three years thereafter for all other project types. The proposed Regulations would also mandate the reporting of voluntary reversals and of errors or omissions. Furthermore, monitoring reports for biological sequestration projects would be required annually during the crediting period and for 100 years following the end of the crediting period, in order to mitigate against the risk of reversals of GHG removals from the atmosphere.

The number of credits issued would be based on the GHG statement provided by the project proponent in their report that must be verified by an accredited third party. The GHG reductions upon which the GHG statement in the project report is based must be quantified in accordance with the proposed Regulations and the applicable federal offset protocol.

The proposed Regulations also stipulate the instances when the Minister may suspend credits in the project proponent's account in respect of a project, such as when a reversal occurs or when an error in a report is identified, as well as the instances when the Minister may revoke credits, such as when there is a voluntary reversal or when an error in a report is confirmed. Project proponents may be required to replace offset credits that are found to no longer be valid due to voluntary reversals, or to errors or omissions.

Environmental integrity account

The proposed Regulations would establish an environmental integrity account in which a percentage of offset credits issued would be deposited by the Minister. This account would comprise a pool of credits acting as a form of insurance for the environmental integrity of the federal offset system. When there is a reversal of GHG reductions determined to be out of the project proponent's control (i.e. an involuntary reversal), the Department would cancel offset credits deposited by the Minister in the environmental integrity account. This account would also be used to replace offset credits when project proponents fail to replace them when required. For biological sequestration projects, the percentage of credits deposited in the environmental integrity account would be based on risk factors set out in the applicable federal offset protocol. The percentage of credits deposited in this account would be 3% for all other project types.

Federal offset protocols

The proposed Regulations would specify the content that federal offset protocols developed by the Minister must contain, such as the methods for the quantification of GHG reductions and the assessment of risks specific to the project activity. A project proponent would have to carry out project activities in accordance with the applicable federal offset protocol. Federal offset protocols would be applicable in all provinces and territories in Canada, with the exception of jurisdictions in which the same project activity is covered by a current protocol in a provincial or territorial offset program.

Consequential amendments

The proposed Regulations would make consequential amendments to the OBPSR to modify provisions that overlap with rules set out under the proposed Regulations related to the suspension of federal offset credits, and to the opening and closing of accounts in the credit and tracking system.

Regulatory development

Consultation

In May 2018, the Department published a discussion paper on compliance options under the federal OBPS. Overall, the Department received 70 submissions providing feedback from industry stakeholders, environmental non-governmental organizations (ENGOs), Indigenous peoples and associations, provincial and territorial governments, and other federal government departments. In terms of offset credits, this paper focused on the potential recognition and use of credits generated from projects in existing provincial offset programs as compliance units in the federal OBPS, as well as possible criteria to ensure the integrity and reliability of these credits, based on program and protocol design, project start date, and third-party verification.footnote 8 Stakeholders expressed support for the recognition and use of credits in the federal OBPS that have already been generated from projects in provincial offset systems. Comments on this compliance options paper also included support for the development of a federal offset system.

In June 2019, the Department published a discussion paper on the design of a federal offset system.footnote 9 The Department held a briefing for provincial and territorial governments and hosted a webinar for interested parties and meetings with Indigenous representatives and specific stakeholders. During the comment period that followed the publication of the discussion paper, the Department received over 80 submissions from industry stakeholders, ENGOs, academics, provincial and territorial governments, and other federal government departments. Stakeholders were generally supportive of the development of a federal offset system. Some submissions requested that projects with start dates prior to the proposed earliest start date of January 1, 2017, and projects receiving direct financial incentives, in addition to revenue from offset credits, be eligible for registration. In response to the latter request, the proposed Regulations would now allow projects receiving other financial incentives to be eligible for registration in the federal system, as long as the project proponent retains exclusive ownership of the GHG reductions generated by the project.

There was also support for the proposed inclusion of seller liability in the design of the system, meaning that project proponents (sellers) would be accountable for credit validity, or responsible for the replacement of invalid credits, rather than buyers. Moreover, there was support for the proposed inclusion of an environmental integrity account that the Department plans to administer to replace offset credits in the event of an involuntary reversal of GHG reductions or when a project proponent fails to replace credits when required. ENGOs were generally supportive of limiting offset project activities to those included in Canada's National Inventory Report.footnote 10 Stakeholders also expressed interest in an inclusive process for protocol development, which the Department is undertaking, and they provided comments for and against the use of project-specific versus standardized baselines.

In July 2020, the Department published an additional discussion paper providing design considerations for the federal offset system with a focus on protocol development and priority project types to be considered in its first phase.footnote 11 The deadline for submitting comments on the discussion paper was September 4, 2020. Over 80 submissions were received from industry stakeholders, Indigenous peoples and associations, ENGOs, provincial and territorial governments, and other federal government departments. Comments from provincial and territorial governments focused on how existing and planned offset systems would interact with the federal offset system. Concerns raised regarding the impact of the federal system on existing or planned provincial systems were addressed in the proposed Regulations by limiting the applicability of a given federal offset protocol to any Canadian jurisdiction without an active provincial or territorial offset protocol for the same project type. Submissions from ENGOs and Indigenous groups placed an emphasis on the inclusion of particular project types, capacity building for Indigenous governments and organizations, the inclusion of Indigenous participants in protocol development, and the protection of Aboriginal rights and titles. Industry stakeholders offered suggestions on how to establish project-specific baselines in offset protocols, and support for particular project types and retroactive crediting.

The submissions received on these three discussion papers informed the design of the proposed Regulations. They are also being considered in the Department's prioritization of project types for the development of federal offset protocols. For each draft protocol, there will be a consultation period of 30 days following the publication of a notice in the Canada Gazette, Part I, announcing that the draft protocol is available for public comment.

Modern treaty obligations and Indigenous engagement and consultation

Pursuant to the Cabinet Directive on the Federal Approach to Modern Treaty Implementation, an assessment of modern treaty implications was conducted. The assessment determined that because participation in the offset system is voluntary, it would not have a direct impact on modern treaty rights.

The proposed Regulations would facilitate potential economic development opportunities through the generation of tradeable offset credits from projects that meet regulatory requirements and follow federal offset protocols. Land-based projects that, for example, improve forest management may contribute to environmental protection, conservation and increased biodiversity in treaty areas. The Department is developing an engagement plan to enable Indigenous perspectives to be reflected in offset protocols developed by the Minister.

Four Indigenous organizations provided feedback in response to the discussion paper published in 2018 requesting future Indigenous engagement and expressing the desire for the eligibility of projects with earlier start dates. Three Indigenous organizations provided feedback in response to the discussion paper published in 2020 requesting future Indigenous engagement, enquiring about potential project impacts on Indigenous rights, and providing support for the prioritization of certain project types with respect to the development of federal offset protocols. The Department offered individual briefings on the discussion papers to three senior bilateral tables and held teleconferences with representatives from the Assembly of First Nations in 2019 and 2020. The development of the federal offset system was also discussed with representatives of the Métis National Council via teleconference in 2019 and 2020.footnote 12

Instrument choice

In the absence of regulations made by the Governor in Council to establish an offset system, the Minister is not authorized to issue federal offset credits, and offset project proponents in Canada may not have a sufficient economic incentive to carry out additional activities on a voluntary basis that remove GHGs from the atmosphere or prevent them from being emitted. Furthermore, facilities in the federal OBPS would continue to provide compensation for their excess emissions without the possibility of acquiring and using federal offset credits, even though these credits are included as a compliance option under the GGPPA.

The Department's recommended approach is the establishment of a federal offset system by means of the proposed Regulations, authorizing the Minister to issue offset credits and allowing eligible project proponents in Canada to receive these credits for certain voluntary project-based activities. The federal offset system would also allow facilities in the federal OBPS to acquire these credits through private trading and use them as compliance units to compensate for GHG emissions that exceed their respective emissions limit. This offset system would therefore increase the number of options available to covered facilities to meet their compensation obligations under the Act, thereby increasing compliance flexibility and potentially resulting in reduced costs for these facilities.

Regulatory analysis

Benefits and costs

This analysis assesses the impacts (benefits and costs) of establishing an offset system under the GGPPA. It compares a baseline scenario in which the Governor in Council has not made the proposed Regulations to a regulatory scenario in which the Governor in Council makes the proposed Regulations that would establish a federal offset system and authorize the Minister to issue federal offset credits.

Under the baseline scenario, a facility in the OBPS has options with respect to how it chooses to meet its compensation obligation under the GGPPA if it emits a quantity of GHGs above its facility emissions limit. First, a covered facility may make an excess emissions charge payment to the Minister. Second, it may use compliance units, which include (i) surplus credits that it has earned or acquired through trade from other covered facilities; (ii) eligible provincial or territorial offset credits that are formally recognized by the Minister under the OBPSR as compliance units; and (iii) federal offset credits. A covered facility may also use a combination of excess emissions charge payments and compliance units to provide compensation for excess emissions. In the baseline scenario, however, federal offset credits are not available because the Minister does not currently have the authority to issue them.

Under the regulatory scenario, the Minister could issue federal offset credits as another type of compliance unit specified under the Act. The proposed Regulations would therefore enable the generation of additional compliance units under the GGPPA. Covered facilities would be able to purchase these compliance units for use in the federal OBPS. While federal offset credits would primarily be intended for use by facilities in the federal OBPS, they could be acquired and used by other interested parties to offset their emissions in certain cases. Regulated entities in a provincial or territorial carbon pollution pricing system may be able to use federal offset credits to offset GHG emissions, provided that the use of these credits is permitted within the provincial or territorial system, and there is an intergovernmental agreement in place at the operational level stipulating that credits may only be used once. Federal offset credits could also be acquired and used by government or business operations to voluntarily offset emissions in an effort to meet their GHG reduction goals, such as to meet greening initiatives or carbon-neutral commitments.

Expected overall impacts

The proposed Regulations could lead to reductions in the costs assumed by covered facilities, as the availability of federal offset credits could increase the total quantity of compliance units available in the federal OBPS. Covered facilities would be able to purchase these credits and use them as compliance units to provide compensation for emissions in excess of their respective emissions limit. Trades of offset credits would be negotiated between project proponents and interested buyers including, but not limited to, covered facilities. Trades would be formalized through contracts, and transfers of offset credits from one party to another would be tracked in the Department's credit and tracking system. Third parties, such as carbon trade exchanges or brokerage services, may play a role in facilitating transactions and may reduce the transaction costs associated with trading activity.footnote 13 Lower prices for offset credits could result from the negotiation of contracts for bulk quantities of credits or agreements to buy or sell credits at predetermined prices at a specified time in the future (future contracts).

This analysis assumes that project proponents would only choose to develop their projects under the proposed Regulations if they anticipate, prior to project implementation, to profit from the sale of federal offset credits, which are expected to trade for prices below the excess emissions charge. Otherwise, it is anticipated that a covered facility would choose to simply pay the excess emissions charge and not purchase offset credits since there would be transaction costs associated with trading activity, such as the costs involved in negotiating and formalizing purchase agreements.

Offset projects are expected to take place primarily in the agriculture, forestry, and waste management sectors. Due to the voluntary nature of the federal offset system, however, it is difficult to accurately forecast, prior to regulatory implementation, the quantity and types of offset projects that may be undertaken across Canada. Therefore, the Department does not plan to conduct quantitative modelling of impacts prior to the coming into effect of the offset system. This analysis instead assesses the expected impacts attributable to the proposed Regulations qualitatively, given the difficulty in forecasting impacts, and given the projected reductions in costs for a similar or lower level of emissions, which are described below.

Impacts for project proponents

In all cases, project proponents would voluntarily participate in the federal offset system. The Minister would issue offset credits to a project proponent for GHG reductions achieved by a registered offset project for a given reporting period if the issuance criteria set out in the proposed Regulations are met. Project proponents would assume costs in generating these credits. Upfront costs could include those associated with feasibility studies, business development, acquiring capital and labour, and legal services. They would have to satisfy the eligibility criteria, implement their projects in accordance with federal protocols, and prepare and submit project reports that require verification. Costs associated with verification would include costs incurred for periodic site visits by representatives from accredited third-party verification bodies. There could also be ongoing costs associated with monitoring the permanence of GHG reductions, depending on the type of project.

Given that project proponents would elect to participate in the federal offset system, it is assumed they would only do so to earn profits (net financial gains) from the sale of their offset credits to covered facilities to be used in the OBPS as compliance units or to other interested parties. Specifically, the total revenue that a project proponent would obtain from the sale of offset credits is expected to exceed the total costs incurred from the generation of these credits.

Reducing costs for project proponents while maintaining the environmental integrity of the federal offset system was a key consideration in the design of the proposed Regulations. Each project proponent would only have to open one account in the credit and tracking system, even if they are managing multiple projects, which would simplify administrative tasks. Flexible reporting periods would allow a project proponent to choose the frequency of their requests for offset credit issuance, subject to the applicable maximum reporting period, helping to reduce reporting and verification costs.

In addition, the proposed Regulations would allow a project proponent to aggregate, or group, smaller projects that use the same federal protocol into one project. Aggregating projects could help streamline registration, monitoring, reporting and verification, and thereby help reduce total costs and increase the economic feasibility of some projects.

The proposed Regulations would place accountability for the validity of credits on the seller, requiring that a project proponent replace any credit that is found to be no longer valid. The buyers of federal offset credits would not be responsible for the validity of the GHG reductions associated with offset credits. Eliminating this risk of credit invalidity for buyers is anticipated to improve the marketability of these credits.

However, in the event of an involuntary reversal, such as a forest fire leading to an involuntary reversal of GHG reductions generated by a forestry project, the project proponent would not be obligated to replace credits if they undertook the applicable measures in their risk management plan. In such cases, the Department would cancel offset credits that have been deposited by the Minister in the environmental integrity account. This account would thus serve as a type of credit insurance, which could have a positive effect on the Department's ability to ensure the environmental integrity of the federal offset system.

Impacts for facilities in the federal OBPS

The establishment of the federal offset system is projected to lead to impacts in the federal OBPS. Specifically, covered facilities would be able to acquire federal offset credits through private trading and use these credits as compensation for their excess CO2e emissions. Each offset credit may be used either

It is assumed that each covered facility acquiring and providing federal offset credits as compensation would expect to realize a net financial gain through its actions. Overall, the proposed Regulations are anticipated to lead to lower total costs associated with carbon pollution pricing if offset credits are used in this way in the federal OBPS.

With respect to the first case above, this analysis assumes that a covered facility would acquire offset credits through private trading for a price per credit that is below the cost of measures that the facility could undertake to reduce excess emissions by one tonne. It is expected that this option would be chosen by a covered facility only if it lowers the overall costs that the facility assumes, or expects to assume, as a result of carbon pollution pricing. However, this option could lead to the deferral of some strategic or technological improvements that the facility may have carried out in the baseline scenario to reduce its excess emissions. It is also possible that a covered facility could find it profitable to acquire offset credits through private trading, increase its level of production, and provide these credits as compensation to offset its excess emissions associated with the increased level of production.

The key assumption underlying the second case above is that a facility in the federal OBPS may be able to acquire offset credits through private trading for a price per credit that is below the charge associated with one tonne of excess CO2e emissions (i.e. the excess emissions charge). Net financial gains could be achieved by providing federal offset credits acquired through trade to the Minister as compensation, rather than making the equivalent excess emissions charge payment or providing another type of compliance unit as compensation. It is assumed that a covered facility would choose this compensation option only if it lowers the overall costs that the facility assumes due to carbon pollution pricing relative to the baseline scenario.

There are several constraints limiting the quantity of federal offset credits that a covered facility could acquire and provide to the Minister as compensation for excess emissions under the GGPPA. In terms of market constraints, purchases of federal offset credits by covered facilities would be influenced in large part by the aggregate supply of, and the aggregate demand for, such credits. In terms of regulatory constraints, facilities in the federal OBPS could only use offset credits as compensation if the credits were issued by the Minister for GHG reductions that occurred no more than eight calendar years before the use of the credits.footnote 14 Also, the OBPSR indicate that a minimum of 25% of the compensation for excess emissions required under the Act must be provided by means of an excess emissions charge payment.footnote 15

GHG emissions and other environmental outcomes

It is anticipated that the federal offset system would further extend the federal carbon pollution price signal to incentivize activities leading to GHG reductions that are not required under existing regulations or covered by other measures related to carbon pollution pricing. The activities of project proponents are expected to lead to real and additional GHG reductions in relation to the project baseline set out by or calculated in accordance with the applicable federal protocol.

Prior to regulatory implementation, it is challenging to forecast the extent to which the proposed Regulations would lead to net GHG reductions — that is, incremental GHG reductions relative to baseline emission levels in the absence of the federal offset system. The demand for federal offset credits is expected to come from multiple sources for different uses. Some uses of offset credits could result in no net GHG reductions, if the GHG reductions linked to credit generation are used to offset emissions that are additional to baseline emission levels. For example, facilities in the federal OBPS would have the option to use credits to offset excess emissions, instead of carrying out more costly measures to reduce these emissions.

Federal offset credits could also be considered as a mitigation measure to offset GHG emissions for a project undergoing an impact assessment by the Impact Assessment Agency of Canada. The use of federal offset credits could be included as a condition in the Minister's decision statement related to the assessment. Other uses of federal offset credits could result in net GHG reductions, if the GHG reductions associated with credit generation are used to offset emissions that are included in baseline emission levels. For instance, governments, businesses and individuals could use these credits to meet voluntary targets, such as net-zero GHG emission targets, or they could choose to voluntarily cancel offset credits for the benefit of the environment.

Projects implemented under the proposed Regulations may lead to environmental outcomes other than GHG reductions. There is the possibility for biodiversity and land conservation co-benefits from nature-based project activities that may occur. For example, potential projects could improve biodiversity and habitat quality through improved forest management or by planting trees on degraded forested land. Other potential projects could improve agriculture systems by adopting sustainable land management activities that enhance soil carbon sequestration on agricultural lands.

Registration and participation in the federal offset system would not affect any other legal requirements faced by project proponents, including those that may apply due to the nature of the project. Nonetheless, federal offset protocols would include implementation safeguards to help ensure that all projects adhere to the highest levels of environmental integrity and to minimize the possibility of unintended negative environmental consequences, such as decreases in biodiversity or habitat from land-based projects.

Government costs

The federal government costs associated with implementation of the proposed Regulations are estimated to be up to $800,000 per year over the 2021 – 2030 period. The Department would incur costs for activities related to regulatory implementation, including the expansion of the OBPS credit and tracking system to accommodate registration of offset projects, reporting, as well as the issuance and tracking of federal offset credits. The Department would also incur costs for new administrative activities, such as managing a help desk and general enquiries service, evaluating offset project applications and report submissions from project proponents, and tracking offset credits issued by the Minister.

Small business lens

The federal offset system would allow project proponents to voluntarily apply to register projects that meet the requirements of the proposed Regulations and the applicable federal offset protocol to generate offset credits that may be sold, banked for future sale, or voluntarily cancelled to help meet corporate sustainability or emission reduction objectives. It is possible that some project proponents may be considered small businesses. However, for the purposes of this analysis, it is assumed that any costs incurred by project proponents in this offset system, including costs incurred by small businesses, do not represent compulsory regulatory costs, as project proponents are not required to participate in the system. Furthermore, it is assumed that any project proponent participating in the offset system is doing so in order to earn revenue from the sale of offset credits that they would expect, prior to project implementation, to exceed the costs associated with their participation in the system. Therefore, it is anticipated that any small business choosing to voluntarily comply with the regulatory requirements would realize a net gain from doing so.

One-for-one rule

Project proponents would incur administrative costs in generating federal offset credits. They would have to demonstrate initially that they meet the eligibility criteria in their registration application. They would also have to demonstrate periodically that they comply with the proposed Regulations and the applicable federal offset protocol by means of regulatory reports that require verification by an accredited third party. Despite the costs that project proponents would incur by carrying out these administrative tasks, this analysis does not consider them to be compulsory costs attributable to the proposed Regulations since participation in the federal offset system would be voluntary. For this reason, the incremental administrative costs associated with implementation of the proposed Regulations have not been monetized and captured for the purposes of the one-for-one rule.

Regulatory cooperation and alignment

Canada is working in partnership with the international community to implement the Paris Agreement, in support of the goal of limiting the rise in global average temperature to less than 2°C and pursing efforts to limit the temperature increase to 1.5°C. As part of its commitments made under the Paris Agreement, Canada pledged to reduce national GHG emissions by 30% below 2005 levels by 2030. The Government of Canada has also committed to achieving net-zero GHG emissions by 2050.footnote 16 To meet these commitments, the federal government is implementing a series of measures, including continuing to put a price on carbon pollution.

The proposed Regulations would support implementation of the federal OBPS, which is a component of Canada's carbon pollution pricing approach. The design of the proposed Regulations is consistent with the Pan-Canadian Greenhouse Gas Offsets Framework, which was developed collaboratively by the federal, provincial and territorial governments between 2016 and 2018, and published by the Canadian Council of Ministers of the Environment in 2019.footnote 17 In general, and where appropriate, alignment with existing offset systems in Canadian jurisdictions (British Columbia, Alberta and Quebec) was pursued. However, the proposed Regulations include some unique requirements to reflect the national context and specific objectives of the federal system, such as allowing for the development of offset projects nationwide, while seeking to minimize overlap between federal, provincial and territorial systems.

Several provincial governments have established, or are in the process of establishing (e.g. Saskatchewan), offset systems to support their carbon pollution pricing programs and policies. The federal offset system is intended to complement these systems. Federal offset protocols would not apply to any new project in a province or territory with an offset system that has or develops a protocol for the same project activity. In the event that a provincial or territorial offset system does not have a current protocol for a project activity that is covered by a federal offset protocol, the project proponent could apply to register in the federal offset system using that federal protocol. Finally, the Department may choose to adapt protocols from existing offset systems in British Columbia, Alberta and Quebec, as well as from other offset systems, for application across Canada.

Strategic environmental assessment

The Department conducted strategic environmental assessments in 2017, 2018 and 2019 for elements of its carbon pollution pricing policies. The proposed Regulations would contribute to the implementation of the pan-Canadian approach to pricing carbon pollution through the establishment of the federal offset system, which would extend the pricing signal to activities not directly subject to carbon pollution pricing policies. The offset system would create further incentives for GHG reductions across Canada, generating additional economic opportunities.

In combination with other measures outlined in the Pan-Canadian Framework on Clean Growth and Climate Change (the Pan-Canadian Framework), the federal carbon pollution pricing system, including the offset system, would support a number of the goals of the 2019 – 2022 Federal Sustainable Development Strategy; specifically, the goals of effective action on climate change, clean growth, clean energy, modern and resilient infrastructure, safe and healthy communities, and healthy coasts and oceans.footnote 18,footnote 19

Gender-based analysis plus

The federal offset system would create opportunities for project proponents to undertake projects in economic sectors that are not currently covered by carbon pollution pricing such as agriculture, forestry and waste management. It is anticipated that project proponents would be incentivized to generate offset credits and carry out projects under the proposed Regulations. There may be opportunities for economic development, employment, and ecological benefits through the development of offset projects by Indigenous peoples in Canada. The Department intends to undertake work to support capacity-building within Indigenous organizations and communities to facilitate their participation in the federal offset system.

Given that participation in the offset system is voluntary, the proposed Regulations are not expected to have a direct impact on any one socio-economic group. However, there may be downstream gender-based analysis plus (GBA+) impacts associated with implementation of the proposed Regulations, depending on the extent to which project proponents elect to participate in the federal offset system. For example, offset project development may nonetheless indirectly provide greater employment opportunities for men and older workers, and in certain geographic regions, because of the demographics and location of agriculture, forestry, and waste management activities. For example, Statistics Canada estimates that, in 2019, males accounted for 68% of agriculture workers and 85% of forestry workers in Canada, while individuals who are 55 years old and over represented 36% of employment in the agriculture and forestry sectors combined, compared to 22% of employment in all sectors nationwide.footnote 20

Implementation, compliance and enforcement, and service standards

Implementation

The proposed Regulations would come into force on the day on which they are registered. For any registration application made before or on December 31, 2023, a project proponent would be eligible to register a project in the federal offset system provided that it started on January 1, 2017, or later, the eligibility criteria are met, and a federal offset protocol is published for the given project type. Starting in 2024, a project proponent would be eligible to register an offset project that started no more than five years before the date of its registration. If a project starts before an approved federal offset protocol is available, it must be registered within 18 months of the publication of the applicable protocol. Conversely, if a project starts after a federal protocol is available, it must be registered within 18 months of the start date of the project. Offset credits would only be issued by the Minister to a project proponent once the proposed Regulations come into force (i.e. once they are registered), the offset project is registered in the credit and tracking system, and the project has generated verified GHG reductions meeting the requirements of the proposed Regulations and following a federal protocol.

Compliance promotion and other activities related to implementation would focus on registration and reporting obligations. Once the federal offset system is in place, a project proponent would be able to submit an application to the Department for project registration, in accordance with the proposed regulatory registration provisions, which include the requirement to supply evidence that a project meets the eligibility criteria and follows the applicable federal protocol.

The Department plans to develop and publish protocols in phases. The initial phase targets project types identified as priorities, informed by input received from interested parties during the consultation period that followed the publication in July 2020 of the discussion paper relating to considerations for protocol development.footnote 11 The list of protocols under development can be found on the Federal Greenhouse Gas Offset System webpage.

A project proponent would be required to submit a project report that has been verified by an accredited verification body, as set out in the proposed Regulations, when requesting that the Minister issue offset credits for GHG reductions achieved by a project for a specific reporting period. Each project report would need to contain information demonstrating compliance with the relevant federal offset protocol, as well as an assessment by an accredited verification body that the quantity of GHG reductions stated in the report is a fair and accurate representation of those achieved in the reporting period. Verified reports would be reviewed by departmental officials prior to the issuance of offset credits by the Minister. Project proponents would be required to correct any errors or omissions in reports and replace any credits issued due to reporting errors or omissions, or voluntary reversals.

Compliance and enforcement, and service standards

When verifying compliance with the proposed Regulations, enforcement officers would apply the principles found in the compliance and enforcement policies developed by the Department. These policies set out the range of possible enforcement responses to alleged violations. If an enforcement officer discovers an alleged violation following an inspection or investigation, the officer would choose the appropriate enforcement action based on the policies.

To support enforcement, consequential amendments would need to be included in the final version of the proposed Regulations, subject to Governor in Council approval. Consequential amendments to the Environmental Violations Administrative Monetary Penalties Regulations would be needed to designate certain provisions of the proposed Regulations in order to authorize enforcement officers to issue administrative monetary penalties for violations of these provisions. The Environmental Violations Administrative Monetary Penalties Regulations specify the method of determining the amount of an administrative monetary penalty in a given situation. The baseline penalty amount applicable to a violation varies depending on the type of violation and category of the violator. Each designated violation is classified according to the regulatory significance of the violation.

In the administration of the federal offset system, the Department would respond to enquiries from the regulated community related to project registration, regulatory reporting and offset credit issuance in a timely manner, taking the complexity and completeness of the request into account. The Department intends to produce guidance material to support submissions of registration applications and regulatory reports, and to assist project proponents in using the credit and tracking system for offset projects and credits. This guidance material would include a description of the information to provide, along with the templates and steps to be followed by project proponents.

Contacts

Judy Meltzer
Director General
Carbon Markets Bureau
Environmental Protection Branch
Department of the Environment
351 Saint-Joseph Boulevard
Gatineau, Quebec
K1A 0H3
Email: ec.tarificationducarbonecarbonpricing.ec@canada.ca

Matthew Watkinson
Director
Regulatory Analysis and Valuation Division
Economic Analysis Directorate
Strategic Policy Branch
Department of the Environment
200 Sacré-Cœur Boulevard
Gatineau, Quebec
K1A 0H3
Email: ec.darv-ravd.ec@canada.ca

PROPOSED REGULATORY TEXT

Notice is given that the administrator in council, pursuant to sections 192 and 195 of the Greenhouse Gas Pollution Pricing Actfootnote a, proposes to make the annexed Greenhouse Gas Offset Credit System Regulations (Canada).

Interested persons may make representations concerning the proposed regulations within 60 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Jackie Mercer, Manager, Offsets and Emissions Trading Section, Carbon Markets Bureau, Environment and Climate Change Canada, 351, boulevard Saint-Joseph, Gatineau (Québec) K1A 0H3 (email: ec.creditscompensatoires-offsets.ec@canada.ca).

Ottawa, February 25, 2021

Julie Adair
Assistant Clerk of the Privy Council

Greenhouse Gas Offset Credit System Regulations (Canada)

Interpretation

Definitions

1 (1) In these Regulations,

Act
means the Greenhouse Gas Pollution Pricing Act. (Loi)
baseline scenario
in relation to a project, means a hypothetical reference case that best represents a conservative estimate of business as usual conditions for GHG reductions or removals for the GHG sources, sinks and reservoirs that would have occurred in the absence of the project. (scénario de référence)
biological sequestration project
means a project involving the net removal of carbon dioxide (CO2) from the atmosphere by plants and microorganisms and the storage of CO2 in vegetative biomass or soils. (projet de séquestration biologique)
federal offset protocol
means a protocol established by the Minister under section 24. (protocole fédéral)
GHG leakage
means an indirect increase in GHGs outside of the project location as a result of GHG reduction or removal activities within the project location. (fuites de GES)
GHG offset system account
means the account opened under section 6. (compte de crédits compensatoires de GES)
GHG reservoir
means a component, other than the atmosphere, that has the capacity to accumulate, store and release GHGs. (réservoir)
GHG sink
means a process that removes a GHG from the atmosphere. (puit)
GHG source
means a process that releases a GHG into the atmosphere. (source)
involuntary reversal
means a reversal that is out of the proponent's control or that occurs in spite of the proponent implementing the project's risk management plan. (renversement involontaire)
reversal
means the release into the atmosphere of GHGs removed by a project for which offset credits have been issued. (renversement)
project
means a project that prevents greenhouse gases (“GHG”s) from being emitted (“GHG reductions”) or that removes GHGs from the atmosphere (“GHG removals”). (projet)
project scenario
means the conditions that result in GHG reductions or removals that occur due to the implementation of a project. (scénario de projet)
proponent
means the person responsible for a project. (promoteur)
start date
in relation to a project, means the first day on which the project achieves a GHG reduction or removal. (date de début)
voluntary reversal
means a reversal that is within of the control of a proponent or resulting from a proponent's failure to implement a risk management plan. (renversement volontaire)

Material discrepancy

(2) For the purposes of these Regulations, the errors or omissions in a report constitute a material discrepancy if

A/B × 100
where
A
is the sum of absolute value of all overstatements and understatements in the report resulting from the errors and omissions, expressed in CO2e tonnes, and
B
is the total quantity of GHG reductions or removals stated in the project report or corrected project report, expressed in CO2e tonnes, or in a reversal report, the quantity of CO2e tonnes reversed; or
(b)
the amount determined by the following formula is equal to or greater than 5% in relation to any overstatement or understatement resulting from an error or omission:
A/B × 100
where
A
is the absolute value of the overstatement or understatement, expressed in CO2e tonnes, and
B
is the total quantity of GHG reductions or removals stated in the project report or corrected project report, expressed in CO2e tonnes, or, in a reversal report, the quantity of CO2e tonnes reversed.

Application requirements — project

2 To be issued offset credits in relation to a project, the proponent shall submit an application for registration to the Minister. The application is to include

Notice

3 A proponent shall notify the Minister, in writing, within 30 days after a change to the registration information set out in paragraph 2(a), subparagraph 2(d)(iii) or changes to contact information of any authorized proponent representative.

Eligibility criteria

4 (1) The Minister shall register a project if

Exception

(2) Despite paragraph (1)(a), if the project has been registered in a GHG offset program outside the federal GHG offset system, the application need not be made within 18 months of the federal offset protocol publication date.

Deactivation of protocol

(3) For the purposes of paragraph (1)(g), the Minister may deactivate a federal offset protocol if

Cancellation

5 (1) The Minister may cancel the registration of a project if

Notice

(2) Before cancelling a registration under subsection (1), the Minister shall notify the proponent in writing of the cancellation and the effective date of the cancellation and provide the proponent with at least 30 days to make representations.

Decision

(3) If the proponent makes representations in accordance with subsection (2), the Minister shall confirm his or her decision to cancel or issue a new decision, together with reasons therefor.

GHG Offset Account

Opening of account

6 (1) Before requesting offset credits in respect of any project, a proponent shall open a GHG offset system account for the project in the tracking system established by the Minister under section 185 of the Act.

Maintaining account

(2) The proponent shall maintain the account for at least

Notice of closure

(3) The Minister may, under subsection 186(3) of the Act, close an account that has been inactive for more than seven years if

Revocation of credits

(4) If an account closed under subsection (3) contains offset credits, the Minister shall revoke them.

Crediting Periods

Duration

7 (1) A GHG offset project may generate credits

Shorter duration — certain circumstances

(2) The Minister may specify a shorter crediting period for a project type to ensure that

Start date

(3) The crediting period begins

Extension — application

(4) To extend a crediting period, a proponent shall, no more than 18 months before the end of the crediting period and no less than 9 months before the end of that period, submit an application to the Minister that includes any changes to the information that was provided in the original application for registration or for the purposes of any previous extension application and any information required by the Minister for the purpose of ensuring compliance with the applicable federal offset protocol.

Extension — decision

(5) The Minister shall extend the crediting period if the eligibility criteria set out in section 4 are met. The Minister shall notify the proponent of his or her decision in this regard at least 3 months before the end of the crediting period.

Limit

(6) A biological sequestration project may not have a crediting period — including all renewals — of longer than 100 years. A proponent may not renew the crediting period for other types of projects more than 2 times.

Issuance of Credits

Project report

8 In order to receive offset credits in respect of a project, a proponent shall submit a project report with a verification report to the Minister no more than 6 months after the end of

Content of project report

9 The report is to include

Issuance of credits

10 (1) The Minister shall issue offset credits to a proponent for the reporting period that is the subject of the report if

Amount of credits

(2) The Minister shall issue offset credits for a reporting period in an amount determined by the following formula:

A - B
where
A
is the quantity of GHG reductions and removals — expressed in CO2e tonnes, — achieved during the reporting period minus
  • (a) the quantity of the GHG reductions and removals, if any, that were required by law or that resulted from activities that were required by law and that are not covered in the baseline scenario;
  • (b) the quantity of the GHG reductions and removals, if any, from GHG sources, sinks and reservoirs that were subject to provincial or federal pricing mechanisms for greenhouse gas emissions and that are not covered in the baseline scenario;
B
is equal to the value determined for A multiplied by
  • (a) for biological sequestration projects, 3% plus a percentage determined by the Minister taking into consideration
    • (i) the extent to which any measure put in place by a proponent restricts land use changes on the project site,
    • (ii) the nature of the proponent's rights to the project site and any risks to the permanency of the project,
    • (iii) the risk of natural disturbance including fire, disease or insect outbreak or other episodic catastrophic events,
    • (iv) the degree to which the proponent has mitigated the risk of natural disturbance, and
    • (v) any risk of insolvency of the proponent.
  • (b) for any other project, 3%.

Notification

11 (1) The Minister shall notify the proponent of the Minister's decision with respect to the issuance of credits together with reasons for the decision.

Response

(2) The proponent may respond to the Minister's decision or provide a revised report and verification report that addresses any deficiencies raised by the Minister within 90 days of issuance of the notice.

Decision

(3) The Minister may confirm his or her decision or issue a new decision.

Environmental integrity account

12 (1) The Minister shall deposit the number of credits determined for variable B in subsection 10(2) into an environmental integrity account established by the Minister in the tracking system referred to in section 185 of the Act.

Restriction

(2) An offset credit that resides in the environmental integrity account may not be sold or transferred.

Records

Location

13 (1) For the purposes of subsection 187(3) of the Act, a proponent is to keep and retain records at their principal place of business in Canada or, on notification to the Minister, at any other place in Canada where they can be inspected.

Retention

(2) For the purposes of subsection 187(5) of the Act, the following records shall be retained for at least 15 years after the crediting period to which they relate or, where monitoring reports are required to be submitted for the project, 15 years after that period:

Reversals

Notification — proponent

14 (1) A proponent who has reason to believe that a reversal has occurred shall, without delay, notify the Minister and include with the notice

Suspension — reversal

(2) The Minister may, for the purposes of subsection 180(1) of the Act, suspend offset credits in the GHG offset system account in respect of a project if

Notice

(3) On suspending offset credits, the Minister shall notify the proponent of the suspension and its effective date.

Obligation — proponent

(4) If the Minister suspends offset credits under paragraph (2)(b), the proponent shall, within 30 days of the suspension, provide the Minister with the information referred to in paragraphs (1)(a) to (c) and, if the proponent contests that a reversal has occurred, evidence in support of their position in the form of a monitoring report prepared in accordance with subsection 27(3).

Reversal report

15 (1) Where the Minister determines that a reversal has occurred, the Minister shall notify the proponent in writing of this determination. The proponent shall — within 18 months of the date of the notice — submit a reversal report with a verification report to the Minister that includes the following information to allow the Minister to determine whether the reversal was voluntary or involuntary:

Voluntary reversal — revocation of credits

(2) If the Minister determines that the reversal was voluntary, the Minister may

Biological sequestration

(3) If the proponent requests the cancellation of a biological sequestration project under section 4(1)(a), the Minister will treat the cancelled project as a GHG reversal and follow the process set out under paragraphs (2)(a) and (b).

Involuntary reversals

(4) If the Minister determines that the reversal was involuntary, the Minister shall

Errors or omissions

16 (1) If, within eight years after submitting a report under these Regulations, a proponent becomes aware of any errors or omissions in the report, the proponent shall, without delay, notify the Minister in writing and include with the notice

Errors or omission — Minister

(2) If, within 8 years after the submission of a report under these Regulations, the Minister is of the opinion that there is an error or omission in the report, the Minister shall notify the proponent in writing.

Suspension — error or omission

(3) The Minister may, for the purposes of subsection 180(1) of the Act, suspend offset credits in the GHG offset system account in respect of a project if

Notice

(4) On suspending offset credits, the Minister shall notify the proponent in writing of the suspension and its effective date.

Corrected project report

(5) The proponent shall submit to the Minister

Contents of corrected report

(6) The corrected project report is to include

Under-issuance

(7) If the corrected project report shows that there was an under-issuance of offset credits, the Minister shall issue to the proponent a number of offset credits that is equal to the amount of the under-issuance and deposit a corresponding number of credits into the environmental integrity account in accordance with subsection 12(1).

Over-issuance

(8) If the corrected report shows that there was an over-issuance of credits, the Minister may

Information

(9) The person shall provide the Minister with the following information with any remission referred to in subparagraph (8)(b)(i):

Lifting of suspension

(10) The Minister shall lift any suspension referred to in subsection (3) once the number of offset credits revoked under paragraph (8)(a) plus any remittance and payments made under paragraph (8)(b) make up for the amount of the over-issuance.

Verifications

Verification body

17 For the purposes of these regulations, a third-party verification body shall

Verification standard

18 A verification body shall conduct verifications to a reasonable level of assurance in accordance with ISO Standard 14064-3 published by the International Organization for Standardization in 2019 entitled Greenhouse gases — Part 3: Specification with guidance for the verification and validation of greenhouse gas statements.

Conflict of interest

19 The proponent shall ensure that no real or potential conflict of interest exists between any party invested in the project — including experts who have been subcontracted to complete the registration or project report — and the verification body, including members of the verification team and any individual or corporate entity associated with the verification body that is a threat to or compromises the verification body's impartiality that cannot be effectively managed.

Limits — verification body

20 (1) A proponent may not cause to have a project report for a project verified by the same verification body

Corrected project report

(2) Despite subsection (1), a proponent may cause a corrected project report to be verified by the same verification body that verified the project report being corrected.

Site visit

21 (1) A proponent shall ensure that a verification body conducts a site visit if

Aggregation

(2) A proponent shall ensure that a verification body conducts a site visit within a reporting period at the site of a project that is part of an aggregation if

Sequestration projects — monitoring reports

(3) The proponent shall ensure the site of a biological sequestration project is visited by the verification body as part of monitoring report verification every six years after the end of the crediting period for the project.

Other visits

(4) A proponent shall ensure that the verification body — as part of every site visit — visits buildings not located where a project activity is carried out if information necessary for verifying a report is kept in those buildings.

Verification of report

22 The verification report shall include

Aggregated projects

23 (1) Projects may be aggregated as one registered project for the purposes of these Regulations if

Application

(2) An application for the registration of an aggregation of projects shall include

Crediting period

(3) The crediting period for an aggregation of projects begins on the day on which the aggregation is registered. However, if the project start date for a project that is part of an aggregation occurs after that day, the crediting period for that project begins on its start date.

Adding of projects

(4) Where a project is added to an aggregation, its crediting period begins on the day on which it is added or its project start date, whichever is later, and ends on the day on which the crediting period for the aggregation ends.

Protocols

24 (1) The Minister may establish federal offset protocols for the purpose of ensuring the accuracy and consistency of information provided under these regulations for a particular type of project as well as permanence of GHG reductions or removals. A protocol may

Parameters

(2) The protocols shall

Publication

(3) The Minister shall publish the protocols on a Government of Canada website and include its effective date.

Application of protocols

25 The federal offset protocol in respect of which a project is registered shall continue to apply for the duration of the crediting period of the project.

Monitoring

Periodic monitoring

26 A proponent of a biological sequestration projects shall regularly and periodically monitor the quantity of GHG reductions and removals achieved by it.

Monitoring report

27 (1) The first monitoring report in respect of a project shall be provided together with the first project report for the project. Subsequent reports shall be provided every 12 months thereafter.

Biological sequestration projects

(2) The proponent shall, in the case of biological sequestration project, annually submit to the Minister a monitoring report for 100 years after the end of the crediting period for the project.

Content of report

(3) The report shall include

General

Risk management plan implementation

28 A proponent shall implement the risk management plan until the end of the crediting period, and in the case of a biological sequestration project, until the end of the 100 years after the end of the crediting period for the project.

Electronic provision of information

29 (1) Any information or documents that are provided to the Minister under these Regulations shall be done so electronically in the format specified by the Minister.

Paper format

(2) If the Minister does not specify a format or if the proponent, because of circumstances beyond their control, is unable to provide information or documents electronically, the proponent may do so in paper form.

Application for transfer

30 (1) A request for the transfer of a project registration to another shall be made to the Minister and include

Assumption of obligations

(2) A person who becomes the proponent under subsection (1) is deemed to have been the proponent since the registration of the project and assumes the obligations of the previous proponent under these Regulations.

Consequential Amendments

31 The portion of subsection 72(1) of the Output-Based Pricing System Regulationsfootnote 21 before paragraph (a) is replaced by the following:

Suspension

72 (1) For the purposes of subsection 180(1) of the Act, the Minister may suspend a surplus credit in an account if the Minister has reasonable grounds to believe that the credit

32 Section 76 of the Regulations is replaced by the following:

Accounts for participants

76 For the purposes of subsection 186(1) of the Act, any person, other than a person responsible for a covered facility or a proponent, as defined in the Greenhouse Gas Offset Credit System Regulations (Canada), who wishes to open an account in the tracking system shall notify the Minister in writing. The Minister shall send to the person the conditions related to the use of that account in accordance with subsection 186(2) of the Act.

33 Subsection 77(1) of the Regulations is replaced by the following:

Notice of closure

77 (1) If an account, other than a GHG offset system account as defined in the Greenhouse Gas Offset Credit System Regulations (Canada), has been inactive for more than seven years, the Minister may give 60 days notice to the holder of the account of the Minister's intent to close the account.

Coming into Force

Registration

34 These Regulations come into force on the day on which they are registered.