Under Canada's Offset System for Greenhouse Gases, the Government of Canada will issue credits for greenhouse gas emission reductions and removals from activities or sectors that are not covered by planned federal regulations of greenhouse gas emissions.  To be eligible to receive offset credits, projects must be within the scope of the Offset System, and must achieve real, incremental, quantifiable, verifiable and unique reductions of greenhouse gases. 

Potential projects that could qualify for offset credits include methane capture and destruction from landfill gas, afforestation and other forestry projects, agricultural soil management and wind energy.  

For example, farmers using reduced or no-till farming methods which help store carbon in their fields could be eligible to receive offset credits for the amount of carbon stored.  Likewise, operators of landfill sites could install equipment to capture and combust the methane gas coming from the landfill, and would be eligible to receive offset credits if the site meets the other eligibility requirements.  Similarly, a wind turbine could be eligible to receive offset credits for the emissions avoided from the displaced electricity.  A list of potential projects can be found in Table 1 below.

There are five steps required to generate offset credits from a project:

1. Creation of a quantification protocol for the project type;
2. Registration of the project;
3. Implementation of the registered project and monitoring of data;
4. Reporting and verification of reductions from the registered project;
5. Certification of reductions and issuance of offset credits by Environment Canada.

Once an offset credit is generated by an eligible project, it can be traded on the carbon market, banked or used for compliance purposes.  These credits could be sold directly to companies subject to federal greenhouse gas regulations, allowing them to meet their required reductions.  Other parties (e.g. small businesses, individuals, travellers) will be able to acquire and use these credits to voluntarily offset greenhouse gas emissions from their activities.

For example, a no-till farming project could benefit from the offset system as below:

1. A farmer in Alberta generates 5 tonnes of CO2 reductions with his registered offset project
2. The farmer then receives 5 credits from the Offset System
3. A company in Quebec purchases 5 credits from the farmer to satisfy federal greenhouse gas regulations
4. The farmer receives payment equivalent to current market value of carbon credits

The Government of Canada has developed three guidance documents which set out the program rules, eligibility requirements and applications processes.  These three documents provide guidance on the rules for the system in three areas:

• quantifying reductions from a project;
• generating credits, and;
• verifying reductions.

The first of these three draft guidance documents,Canada's Offset System for Greenhouse Gases: Guide for Protocol Developers, was published in CanadaGazette, Part I in August 2008 and proposed the rules and guidance on the requirements and processes to quantify the greenhouse gas reductions for projects in Canada's Offset System.

The two draft guides that will be published in the Canada Gazette on June 12 are Canada's Offset System for Greenhouse Gases: Program Rules and Guidance for Project Proponents and Canada's Offset System for Greenhouse Gases: Program Rules for Verification and Guidance for Verification Bodies.  These guides propose the rules and guidance on the requirements and processes to create offset credits, from the registration of the project to the issuance of offset credits; and on the requirements and processes to verify the eligible greenhouse gas reductions achieved from a registered Offset Project. 

These two documents will be published in the Canada Gazette, Part I for a 60-day public comment period.  Consideration will be given to comments received and the final versions of all three guidance documents published in the fall. 

As we finalize the offset system, we will explore approaches to harmonize the federal and various provincial offset systems, with an objective to ensure that carbon trading markets can function efficiently.

For more information on the Offset System, please visit www.ec.gc.ca/creditscompensatoires-offsets

Table 1: List of potential offset projects