Carbon pollution pricing: options for a Federal Greenhouse Gas Offset System, chapter 14

Projects must be implemented in a way that is consistent with the Federal Offset Protocol, including the requirements for greenhouse gas (GHG) quantification, monitoring, and record keeping.

Offset Credits will be issued only for the GHG reductions achieved (that is, the GHG sequestration has already occurred) after the project is registered and implemented. The Project Proponent will need to prepare a Project Report to identify: the project, applicable Federal Offset Protocol, the reporting period covered, and the GHG reductions in tonnes of CO₂e that are claimed.

A reporting period is the length of time over which GHG reductions occur for a registered offset project. Environment and Climate Change Canada is proposing a minimum reporting period of one year which will allow a Project Proponent to request Offset Credit issuance annually. Environment and Climate Change Canada is proposing a maximum reporting period of three years in order to allow projects to delay Offset Credit issuance requests, helping to reduce costs for verification and administration.

The Project Proponent would need to submit their first Project Report to cover the first full calendar year after the project is registered. The frequency of subsequent submissions would generally be at the discretion of the Project Proponent but within the three-year reporting period specified by Environment and Climate Change Canada. However, specific reporting requirements may be developed for cases where a project has applied to retroactively start the crediting period prior to the registration date, or for some projects types where annual verification may be required depending on the nature of the project activities.

Crediting periods are separate from reporting periods and specify the number of years an offset project can generate offset credits. Environment and Climate Change Canada is proposing that the maximum crediting period for non-sequestration projects is eight (8) years, if potential exists for renewal, or ten (10) years if no renewal is possible (one-time only). If applicable, at the end of the first 8-year crediting period, Project Proponents may re-register the project for a further eight years. The renewal application would undergo a complete assessment by the Program Authority against the most recent version of the relevant Federal Offset Protocol and the baseline would be defined for the re-registration year that is applied to the project.

In order to ensure that Project Proponents do not increase emissions between crediting periods or release sequestered greenhouse gases and sequester them again during a subsequent crediting period, if a renewal is approved, crediting periods must be contiguous. In some cases, shorter crediting period lengths may be appropriate to recognize changes in baseline conditions (e.g. an impending regulation, faster technological change or increased adoption rates, etc.).

For forest sequestration projects, the proposed maximum crediting period length would be 30 years unless specified in the Federal Offset Protocol, with the potential for renewal. This exception takes into account that forest sequestration projects absorb carbon slowly over a long period.