Guidance for the Reducing Greenhouse Gas Emissions from Refrigeration Systems federal offset protocol

Introduction

The Reducing Greenhouse Gas Emissions from Refrigeration Systems federal offset protocol (the Protocol) was published under the Canadian Greenhouse Gas Offset Credit Regulations (the Regulations). The Regulations establish Canada's Greenhouse Gas (GHG) Offset Credit System.

The Protocol incentivizes projects that reduce the usage of hydrofluorocarbons (HFCs) with a high global warming potential (GWP). These substances are used as refrigerants in commercial and industrial refrigeration and air conditioning systems. This can be done by retrofitting pre-existing systems or installing new systems and using a refrigerant with a low GWP to generate GHG emission reductions. Federal offset credits may be issued for these reductions, provided requirements under the Regulations and the Protocol are met.

This guidance is intended for proponents implementing projects following the Protocol.  It is also intended for related stakeholders, such as owners and operators of refrigeration or air conditioning systems, consultants, and verification bodies. In this guidance, the term “refrigeration system” is sometimes used to cover “commercial and/or industrial refrigeration or air conditioning system”.

This guidance provides clarification, explanation, and/or justification regarding some of the provisions in the Protocol in order to help understand requirements and facilitate project implementation. The information in this guidance is applicable to any versions of the Protocol, unless specified otherwise.

This guidance is not an overview of the Protocol nor a free-standing document. It is meant to be used along with the Protocol and the Regulations. It is important to note that the information contained within this guidance is not legal advice and does not provide an interpretation of the Protocol or the Regulations.

In the event of any conflict or discrepancy between the information in this guidance and the Protocol or the Regulations, the Protocol or the Regulations shall prevail. Proponents are advised to become familiar with the Protocol and the Regulations to ensure a full understanding of legal obligations.

In addition to this guidance, the following resources provide additional supporting information for proponents interested in implementing projects following the Protocol:

• The Federal Offset Protocol Overview: Reducing greenhouse gas emissions from refrigeration systems provides a high-level summary of the Protocol
• A March 16, 2023 webinar provided an overview of the Reducing Greenhouse Gas Emissions from Refrigeration Systems protocol. Contact creditscompensatoires-offsets@ec.gc.ca to receive a copy of this presentation
• The Overview – Canadian Greenhouse Gas Offset Credit System Regulations under the Greenhouse Gas Pollution Pricing Act (Regulations Overview) outlines key requirements under the Regulations

Protocol scope and use

Typical facilities with refrigeration systems

Projects may be implemented following the Protocol with commercial or industrial refrigeration or air conditioning systems in facilities that include, but are not limited to:

• retail grocery stores
• ice rinks
• food processing plants
• shopping centers
• office buildings, and
• cold storage warehouses

Related section in the Protocol: 2.0

Typical low-GWP refrigerants

The Protocol sets the conditions for refrigerants that can be used in a project. Refrigerants with a low GWP include, but are not limited to:

• hydrofluoro-olefins (HFOs)
• hydrofluoro-ethers (HFEs)
• some hydrofluorocarbons (HFCs)
• carbon dioxide (CO₂)
• water
• air
• ammonia
• propane
• isobutane
• isopentane
• propylene
• glycol, or
• lithium-bromide

Related sections in the Protocol: 2.0, 3.0, and 4.2

Proponents

A proponent implementing a project following the Protocol may be the owner or operator of the refrigeration system. Alternatively, the proponent may be an offset project developer acting on behalf of, and in partnership with, the system’s owner.

Authorizations and exclusive entitlement

If the proponent is not the owner of the refrigeration system where the project takes place, they must have the necessary authorizations to carry out the project activities. Furthermore, the proponent must have documents that demonstrate those authorizations. For example, it could be a contract or written agreement between the proponent and the relevant entity.

In such situations, the proponent must also ensure they have exclusive entitlement to claim the federal offset credits issued for the GHG emission reductions generated by the project. Furthermore, the proponent must have documents that demonstrate that exclusive entitlement. For example, the contracts and written agreements mentioned above can demonstrate that entitlement.

Additional information on the requirements related to having exclusive entitlement to claim offset credits is available in the Regulations Overview. It also covers the necessary authorizations to carry out project activities and direct financial incentives.

Aggregation

Projects implemented following the Protocol can be aggregated to pool GHG emission reduction potential and reduce costs related to project implementation, reporting and verification. Aggregation may be beneficial for small refrigeration systems.

Multiple individual projects (each occurring at an individual project site) can be grouped to form an aggregation of projects provided that all projects are located within the same province or territory and the other requirements are met. Multiple project activities (more than one system retrofit and/or installation) at a single project site form a single project and cannot form an aggregation of projects.

The other requirements for the aggregation of projects implemented following the Protocol are set out in the Regulations.

Related section in the Protocol: 6.3

Eligibility

Project type

Projects eligible under the Protocol may be with commercial and industrial refrigeration systems. The project site must have a fixed location (geographic coordinates). Projects pertaining to mobile refrigeration systems (including systems installed on trucks, cargo ships and aircraft) or residential refrigeration systems are not eligible.

Related sections in the Protocol: 1.0 and 2.0

Baseline scenario

Baseline conditions

For a project to be eligible, one of the following baseline conditions must be met before the project start date:

1. There is one or more pre-existing refrigeration systems of a type identified in Table 1 in the Protocol at the project site, and no legal requirement exists to either replace the pre-existing refrigeration system(s), or to change the refrigerant or any piece of equipment within the pre-existing refrigeration system(s) or
2. There is no pre-existing refrigeration system at the project site where one or more new refrigeration systems will be installed

Related section in the Protocol: 3.0

Pre-existing refrigeration systems

As defined in Section 2.0 of the Protocol, a pre-existing refrigeration system means a refrigeration system that has been using the same refrigerant and operating at the project site for more than 3 years prior to the project start date, and will be retrofitted to use an eligible refrigerant, or replaced by a new refrigeration system that uses an eligible refrigerant.

A refrigeration system that was operating at the project site for three years or less before the project start date or had its refrigerant replaced during the three years preceding the project start date, is not considered to be a pre-existing refrigeration system under the Protocol. Therefore, if there is such a system on the project site, the applicable baseline condition is option (b) in the section above, i.e. there is no pre-existing system at the project site.

Related sections in the Protocol: 2.0 and 3.0

Ozone-depleting substances as refrigerants

Retrofit or replacement of a pre-existing refrigeration system that uses a refrigerant which consists in whole of an ozone-depleting substance (ODS) is not eligible under the Protocol.

A pre-existing refrigeration system that uses a refrigerant that contains a blend of ODS and HFCs may be eligible, but only for the HFC portion of the refrigerant. See the section on quantification in this guidance for clarification on how to exclude the ODS portion of the refrigerant from the calculations.

It should be noted that the presence on the project site of a pre-existing refrigeration system with a refrigerant consisting of ODS in whole must be reported in the description of the project site (through the registration application and the first project report) even if such a system is not eligible.

Related section in the Protocol: 3.1

Project scenario

As part of a project, the eligible project activities are:

1. The retrofit of a pre-existing refrigeration system of a type listed in Table 1 to utilize an eligible refrigerant that replaces a high-GWP refrigerant
2. The purchase and installation of a new refrigeration system of a type listed in Table 2 that contains an eligible refrigerant, either to replace one or more pre-existing systems with a high-GWP refrigerant or, if there is no pre-existing refrigeration system, as a completely new system

Any high-GWP refrigerant extracted from a pre-existing refrigeration system being retrofitted or replaced must be sent for destruction or reclamation at an authorized destruction or reclamation facility.

In order to be eligible for use in the project scenario, refrigerants must meet the following conditions:

• Refrigerants must have a GWP lower than the value applicable to the corresponding refrigeration system type as set out in Table 2 of the Protocol or, if applicable, lower than the provincial or territorial GWP limit
• When a pre-existing refrigeration system is being retrofitted or replaced, the refrigerant used in the project scenario must have a GWP lower than the GWP of refrigerant contained within the pre-existing refrigeration system
• Refrigerants must not consist, in whole or in part, of any ODS
• Refrigerants must not have been previously used in another refrigeration system owned or operated by the proponent in whole or in part

Related sections in the Protocol: 4.1, 4.2 and 4.3

Alternative project configurations

If there are multiple pre-existing refrigeration systems at the project site, they can be replaced by a single new refrigeration system as a single project activity if the following conditions are met:

• The project must follow version 1.2 of the Protocol (as such project activity is not permitted under versions 1.0 and 1.1)
• The cooling capacity of the new refrigeration system is no less than 90% of the cooling capacity of all pre-existing refrigeration systems combined
• The GWP of the eligible refrigerant used in the new system is lower than the GWP of refrigerant contained within each corresponding pre-existing system

For the quantification of GHG emission reductions from this project activity, the value of the parameter BE_Annual,i under Equation 4 (version 1.2 of the Protocol) must represent the sum of the baseline scenario GHG emissions from all pre-existing systems.

The replacement of one pre-existing system with multiple new systems is currently not eligible under the Protocol.

Related section in the Protocol: 8.1.4 (version 1.2)

Use of ammonia in project scenario

When there is no pre-existing refrigeration system at the project site, the purchase and installation of a new system using ammonia is not an eligible project activity. However, when there is a pre-existing refrigeration system at the project site using high-GWP HFCs in its refrigerant, ammonia is considered an eligible refrigerant in the project scenario for system retrofits and in new system installations that replace the pre-existing refrigeration system at the project site (provided that other eligibility requirements are met).

Related section in the Protocol: 4.2

Exclusion of decrease in cooling capacity (downsizing)

GHG emission reductions resulting from downsizing a pre-existing refrigeration system’s cooling capacity are not eligible under the Protocol as they are not the result of a reduction in high-GWP refrigerant usage, which is the purpose of the Protocol. To this end, the refrigeration system used in the project scenario must not have a cooling capacity that is less than 90% of the cooling capacity of the pre-existing refrigeration system, if one exists.

Related section in the Protocol: 4.1

Refrigeration systems using fossil fuels as power source

The retrofit, replacement, or installation of refrigeration systems that utilize fossil fuels as a direct source of heat or power, such as natural gas-powered absorption or adsorption chillers and heat pumps, are not eligible project activities under the Protocol. However, the use of waste heat as a source of heat or power for a refrigeration system is allowed as it is not considered a direct source of heat or power.

Related section in the Protocol: 4.3

Crediting period

Crediting period length and renewal

A project implemented following the Protocol has a crediting period of 10 years which cannot be renewed. This is consistent with the intended outcomes of the Kigali Amendment to the Montreal Protocol, and its implementation in Canada via the Ozone-Depleting Substances and Halocarbon Alternatives Regulations (ODSHAR), which includes a phasedown on new HFC imports of 85% by 2036.

While HFCs previously imported and currently in use are not regulated, it is expected that non-HFC refrigerants in Canada will become more commonplace over time as the supply of HFCs becomes constricted and their costs rise. As a result, the Protocol takes a conservative approach to anticipating the business-as-usual scenario that would apply in the mid-2030s.

Related section in the Protocol: 6.2

Quantification

General approach

The GHG emission reductions generated by a project implemented following the Protocol are quantified as the difference between the emissions from the baseline scenario (i.e., in the absence of an offset project) and those from the project scenario, (i.e., when project activities are carried out). The following sections offer guidelines on quantifying annual baseline scenario GHG emissions and annual project scenario GHG emissions using relevant equations in Sections 8.1 and 8.2 of the Protocol, respectively.

These annual GHG emissions must then be adjusted to match the length of any full or partial calendar year covered by the reporting period before being inserted into the final equation to determine the GHG emission reductions generated by the project during said calendar year covered by the reporting period.

As input for the quantification, only default values and data from the manufacturer of systems are used as there is no direct measurement of refrigerants or system leaks required from the proponent on an annual basis. However, the amount of refrigerant sent for reclamation and destruction would need to be measured, which is usually done by the reclamation or destruction facility or an authorized/certified contractor.

Related section in the Protocol: 8.0

Calculation of refrigerant GWP

For a refrigerant used in a pre-existing refrigerant system or a new system being installed that is made of a single chemical component, the GWP of the component must be retrieved from Column 2 of Schedule 3 to the Greenhouse Gas Pollution Pricing Act (Act). For any chemical component not listed in Schedule 3 to the Act, the GWP is zero.

If the refrigerant is a blend of multiple chemical components, the GWP of the blended refrigerant must be calculated using Equation 1. The proportion of each component in the blend must match the refrigerant manufacturer’s datasheet. The GWP of each component must be retrieved from Column 2 of Schedule 3 to the Act.

Such calculation is required for any pre-existing system in the baseline scenario, if applicable, and all systems in the project scenario.

Related section in the Protocol: 8.0.1

Baseline scenario GHG emissions

Baseline scenario GHG emissions are quantified separately for each refrigeration system in the baseline scenario using Equation 2, which includes two key parameters: refrigerant GWP and charge size (Q). 

Baseline scenario refrigeration system type in absence of a pre-existing refrigeration system

For quantification purposes, when there is no pre-existing refrigeration system at a facility where a new refrigeration system is being installed, the baseline scenario system must be of the same type as the new refrigeration system being installed. However, where the new refrigeration system is an absorption/adsorption chiller or an absorption/adsorption heat pump, the baseline scenario system type must be a regular chiller or heat pump, respectively.

The selection of the baseline scenario system dictates which refrigerant GWP to use in the quantification of the baseline scenario GHG emissions, as explained in further detail below.

Related section in the Protocol: 8.1

Baseline scenario refrigerant GWP

The GWP of the refrigerant in the baseline scenario (GWP_BRefrig) is determined as per the conditions in Section 8.1.1 of the Protocol. The guidelines below provide clarifications on how to proceed.

For system retrofits:

The GWP of the refrigerant in the pre-existing refrigeration system is used as the baseline scenario refrigerant GWP.

If the refrigerant of the pre-existing system contains ODS in part, a value of zero must be used for the ODS portion of the refrigerant for the GWP calculation in Equation 1. Table A below provides a few examples on how the GWP of refrigerant blends is calculated in different scenarios.

For new system installations:

1. When there is a pre-existing refrigeration system:
   1. If a GWP limit applies to the new system being installed, the baseline scenario refrigerant GWP is either the corresponding GWP outlined in Table 5 of the Protocol, or the applicable provincial or territorial GWP limit, whichever is lower. It is the proponent’s responsibility to identify the provincial or territorial GWP limit that is applicable to the project’s refrigeration system type in the province or territory where the project is taking place. The GWP of the refrigerant in the pre-existing system is not used because, when installing a new system, GWP regulatory limits are applicable.
      In this case, the proponent must still calculate the GWP of the refrigerant in the pre-existing system to ensure that the refrigerant used in the project scenario has a GWP lower than the GWP of the refrigerant in the pre-existing refrigeration system.
   2. If no GWP limit applies to the new system being installed (e.g. commercial air conditioning and heat pump at the time of publication of this guidance), the GWP of the refrigerant in the pre-existing refrigeration system is used as the baseline scenario refrigerant GWP.
2. When there is no pre-existing refrigeration system:
   1. If a GWP limit applies to the new system being installed, the baseline scenario refrigerant GWP is either the GWP in Table 5 of the Protocol corresponding to the refrigeration system type, or the applicable provincial or territorial GWP limit, whichever is lower.
   2. If no GWP limit applies to the new system being installed (e.g., commercial air conditioning and heat pump at the time of publication of this guidance), the baseline scenario refrigerant GWP is the GWP in Table 5 of the Protocol corresponding to the refrigeration system type.

If at any time during the crediting period there is a change in the GWP limit in ODSHAR or in the applicable province or territory, the proponent must use the new GWP limit in the quantification of baseline scenario GHG emissions from the day upon which the new regulatory GWP limit comes into force. Table A2 provides examples of selecting the correct GWP for use in Equation 2.

Baseline scenario charge size

• Where there is a pre-existing refrigeration system being retrofitted or replaced by a new refrigeration system, the actual charge size (Q) of the pre-existing system is used for the quantification of the baseline scenario GHG emissions in Equation 2. That value is the recommended charge size specified by the manufacturer of the pre-existing system
• Where there is no pre-existing refrigeration system and a new refrigeration system is being installed, the proponent must justify the charge size of the baseline scenario system based on the charge size that would be needed to achieve the same cooling capacity as the project scenario system. The justification can be made by requesting specifications for three or more currently commercially available systems with a similar cooling capacity as the new system and averaging their specified charge size. Alternatively, the proponent can consult a third-party refrigeration expert to determine the charge size needed to match the cooling capacity of the new system being installed

The proponent must retain all the records used for justification of the baseline scenario charge size, for reporting and verification purposes.

For projects registered under version 1.2 of the Protocol: where a pre-existing refrigeration system is replaced by a new refrigeration system being installed subject to an ODSHAR GWP limit or a provincial or territorial GWP limit, and the pre-existing system’s refrigerant contains a portion of ODS, the mass of ODS must be subtracted from the charge size of the pre-existing system (Q, to be used in Equation 2) by using Equation 3 of version 1.2 of the Protocol.

When a project includes destruction of the HFCs in the pre-existing system’s refrigerant, the charge size of the baseline scenario must not exceed 90% of the recommended charge size by the manufacturer. This condition is set to ensure baseline scenario refrigeration system GHG emissions are conservative by accounting for leaks during transportation, when transferring refrigerant into storage tanks, and during processing of the refrigerant at the authorized destruction facility.

Related section in the Protocol: 8.1.2

Effects of refrigerant reclamation and destruction on the quantification of GHG emission reductions

Under the Protocol, high-GWP refrigerant can only be disposed of through reclamation or destruction at an authorized facility located in Canada. The proponent sending the high-GWP refrigerant extracted from a pre-existing refrigeration system to a reclamation or destruction facility located outside Canada would make the entire project ineligible under the Protocol.

For a project where the high-GWP refrigerant from a pre-existing refrigeration system (either in a system retrofit or a new system installation) is sent for reclamation, the GHG emission reductions are generated for the replacement of the high-GWP refrigerant with a low-GWP refrigerant.

For a project where the high-GWP refrigerant from a pre-existing refrigeration system is sent for destruction, supplemental GHG emission reductions can be claimed. These are in addition to the reductions resulting from the replacement of the high-GWP refrigerant with a low-GWP refrigerant.

This is because the destruction of high-GWP refrigerant ensures that the refrigerant would not return back to the market. Therefore, there would not be any future leaks and related GHG emissions from its use. This is addressed in the quantification of the baseline scenario GHG emissions, as opposed to project scenario GHG emissions. This approach assumes that emissions from the high-GWP refrigerant would have occurred in the baseline scenario, even though the destruction takes place in the project scenario.

This approach also enables a simple yet high-integrity quantification methodology. Concretely, this is addressed in Equation 2 by using 0% as the value for Refrigerant Recovery Efficiency (RRE = 0%), and adjusting the system lifetime to 10 years (LT = 10) regardless of the system type. This allows the proponent to benefit from GHG emission reductions generated from high-GWP refrigerant destruction for the entire crediting period regardless of the pre-existing refrigeration system lifetime.

Destruction of HFCs from sources other than the high-GWP refrigerant extracted from a pre-existing refrigeration system, and destruction of the ODS portion of the high-GWP refrigerant extracted from a pre-existing refrigeration system are not eligible under the Protocol.

Related section in the Protocol: 8.1.3

Table A - Examples of calculation of refrigerant GWP using Equation 1

Refrigerant in pre-existing system	Refrigerant composition from manufacturer specifications	GWPs from Schedule 3 of the Act	GWP of refrigerant (using Equation 1 if a blend)
1. R-134a (HFC-134a)	100% HFC-134a	HFC-134a: 1300	$$1300$$
2. R-404A	44% R-125 (HFC-125) 52% R-143a (HFC-143a) 4% R-134a (HFC-134a)	R-125: 3170 R-143a: 4800 R-134a: 1300	$$\underset{\text{R-125}}{\underbrace{(0.44\times 3170)}}$$ $$+\underset{\text{R-143a}}{\underbrace{(0.52\times 4800)}}$$ $$+\underset{\text{R-134a}}{\underbrace{(0.04\times 1300)}}=3942.8$$
3. R-402A	38% R-22 (HCFC-22) 60% R-125 (HFC-125) 2% Propane	R-22: 0 (ODS, not in Schedule 3 of Act) R-125: 3170 Propane: 0 (not in Schedule 3 of Act)	$$\underset{\text{R-22}}{\underbrace{(0.38\times 0)}}$$ $$+\underset{\text{R-125}}{\underbrace{(0.60\times 3170)}}$$ $$+\underset{\text{Propane}}{\underbrace{(0.02\times 0)}}=1902$$

Table B - Examples of determination of baseline scenario GWP for use in Equation 2

Project activity	Pre-existing system refrigerant Type Refrigerant Refrigerant GWP	Project scenario system Type Table 5 GWP limit	Baseline scenario GWP	Relevant condition from Section 8.1.1 of Protocol	Rationale
1. Retrofit	Centralized refrigeration system R404A 3942.80	Same as pre-existing system 2200	3942.80	1	No GWP limit applies for retrofits: Where a pre-existing system is being retrofitted, the baseline scenario refrigerant GWP will be the same as the pre-existing system refrigerant.
2. New installation	Stand-alone low temperature refrigeration system R407A 1923.4	Condensing unit 2200	2200	2(a)	A GWP limit is applicable to the new system type: Where a new refrigeration system is being installed and a GWP limit is applicable to the system type, the baseline scenario refrigerant GWP will be the same as the GWP limit in Table 5.
3. New installation	Chiller R407C 1624.21	Commercial AC 2000	1642.21	2(a)	A GWP limit is not applicable to the new system type: Where a new refrigeration system is being installed and a GWP limit is not applicable to the system type (i.e., commercial AC system and heat pump, as of publication of this document), the baseline scenario refrigerant GWP will be the same as the pre-existing system refrigerant.
4. New installation	No pre-existing system	Heat pump 2000	2000	2(c)	There is no pre-existing system and no GWP limit applies to the new system: the baseline scenario refrigerant GWP will be the same as the GWP limit in Table 5 regardless of if a GWP limit is applicable to the system type.

Related section in the Protocol: 8.1.1, and Table 5

Project scenario GHG emissions

The project scenario GHG emissions are quantified using the equation in Section 8.2 of the Protocol. It should be noted that the parameters in this equation are independent of the baseline scenario; the GWP of the refrigerant used in project scenario (GWP_PRefrig) is determined according to Schedule 3 of the GGPPA. If the refrigerant is a blend, Equation 1 is to be used accordingly.

The charge size (Q) of the refrigerant in the project scenario is the charge size recommended by the manufacturer of the project scenario refrigeration system. The values for the parameters AARL, IL, QRD, and LT must be retrieved from Table 4 and the value for RRE must be 99% for the project scenario.

Related section in the Protocol: 8.2

Leakage

In the context of an offset project, leakage refers to an increase of GHG emissions or a decrease of GHG removals outside the project site due to the implementation of the project activities on the project site. In the context of the Protocol, this term does not refer to leaks or releases of refrigerant from refrigeration systems.

HFC imports are regulated in Canada. Project activities under the Protocol are not expected to have a significant impact on domestic or international refrigerant markets. As a result, leakage was determined to not be applicable to this project type and there are no conditions related to leakage in the Protocol.

Related section in the Protocol: 8.3

Reversals and environmental integrity account

Reversals

GHG emission reductions generated by a project implemented following the Protocol are achieved by replacing a high-GWP refrigerant with a low-GWP refrigerant. In certain cases, reductions are also achieved by destroying HFCs that would eventually be released in the atmosphere. These GHG emission reductions are permanent with no risk of reversal. Therefore, reversal risk management plans and permanence monitoring are not applicable for projects implemented following the Protocol.

Contribution to the environmental integrity account

The environmental integrity account (EIA) consists of a pool of credits acting as a form of insurance for ensuring the environmental integrity of Canada’s GHG Offset Credit System. All projects must contribute federal offset credits to the EIA.

The EIA contribution rate for projects implemented following the Protocol is 3% of the GHG emission reductions generated (after deducting any GHG emission reductions for which the proponent agrees to forego offset credits pertaining to direct financial incentives received for the project, as per section 29(2) of the Regulations, as applicable). As a result, the number of federal offset credits issued to the proponent for a reporting period will represent approximately 97% of the GHG emission reductions, depending on the result of the rounding.