Carbon pollution pricing: options for a Federal Greenhouse Gas Offset System, chapter 3

Context and rationale for a Federal GHG Offset System

Offset credits represent GHG emissions reductions or removal enhancementsFootnote 1 resulting from voluntary actions taken to reduce or avoid emissions from sources or increase removals by sinks. Each offset credit generated by an offset project represents one tonne of carbon dioxide equivalent (CO2e) reduced or removed from the atmosphere, compared to what would have happened in the absence of the offset project activity.

Under the federal Output-Based Pricing System (OBPS), a covered facility can remit compliance units, including offset credits, to compensate for emissions that exceed their limit. In this way, an offset credit is a substitute for direct emission reductions on the part of the covered facility and provides an opportunity to reduce the cost of compliance. The establishment of a Federal GHG Offset System is expected to increase the supply of compliance units that are available for use under the OBPS. Federal Offset Credits will be tradeable in the same manner as surplus credits in the OBPS tracking system.

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