Carbon

Forestry Offsets in BC

February 18, 2021

Introduction

Increasingly, investors are requiring companies to align with the Task Force on Climate-related Financial Disclosures (TCFD) [1]. The TCFD specifies that companies should set greenhouse gas (GHG) emissions reduction targets. Carbon offsets are a key tool in the toolbox for companies looking to make progress against GHG emissions reduction goals. Of all the various carbon offsets types out there, forest carbon offsets are considered the most preferable by corporate purchasers given their secondary environmental benefits.

Previously we discussed the basic criteria for offset project eligibility [2] and how these relate to unique characteristics for forest carbon offsets [3]. We then discussed some of the primary issues associated with developing carbon offsets on public lands in Canada: ownership, additionality and permanence [4]. With these primary issues in mind, we now turn our attention to jurisdictions that have established carbon trading systems where forest carbon is permitted (or is being considered) as a valid project type. Our analysis builds on a document titled Crown and Carbon [5] which conducts a jurisdictional review of the legal precedents across Canadian provinces and international jurisdictions. We begin this analysis with Canada’s leading jurisdiction on forest carbon offsets: the province of British Columbia (BC).

Background

BC is the only province with a legal framework for forest carbon storage and offsets creation on Crown lands. In 2007, the province of BC passed the Greenhouse Gas Reduction Targets Act [6] which set the goal of reducing provincial GHG emissions by 80% below 2007 levels by 2050. This legislation also committed the public sector to the achievement and maintenance of carbon neutrality by 2010 through the Carbon Neutral Government Regulation [7]. Under this regulation, the government is required to purchase BC-based carbon offsets from several different project types, including from forestry projects. The emissions reductions attributable to a forestry project would not be its absolute carbon sequestration potential, but the difference between improved forestry management practices compared to a business-as-usual (BAU) scenario.

Originally, the Emission Offsets Regulation [8] governed the validation and verification process for carbon offset initiatives. Additionally, any projects under consideration were required to register with the Crown carbon offset agency, Pacific Carbon Trust. In 2013, the Pacific Carbon Trust was transitioned into the Climate Action Secretariat of the Ministry of the Environment to reduce government spending [9]. In 2015, the Greenhouse Gas Industrial Reporting and Control Act (GGIRCA) [10] was passed, which created the BC Carbon Registry (the Registry) [11] dissolving the previous legislative process.

BC Forest Carbon Framework

The Ministry of Forestry, Lands, and Natural Resource Operations (FLNRO) developed The Forest Carbon Emission Offset Project Development and Atmospheric Benefit Sharing Policy [12,13] (the Policy), in addition to The Forest Carbon Offset Protocol [14] (FCOP) to guide the development of forest offset projects. According to the Policy, the province identifies itself as being entitled to any atmospheric benefits Crown land might provide. Therefore, when attempting to enter into a forest offset agreement, a project proponent must first demonstrate the right to ownership that would entitle them to claim emission offsets from Crown land and enter into an Atmospheric Benefit Sharing Agreement (ABSA) with the province.

The Policy states that the province may “use legally established instruments (e.g. a tenure or license), to authorize a proponent to use Crown land for the purposes of undertaking a forest carbon emission offset project”. ABSA proponents must either be independent Indigenous communities or small organizations in partnership with these communities to establish projects on Crown land. Further, approval for all such projects require consultation and accommodation with the associated Indigenous communities. Once entered, all ABSAs are valid until 2025, and are subject to review every five years.

According to the Policy, all forest carbon offset projects must:

adhere to all relevant legislation;
receive approval from all appropriate Ministers (e.g. the Forestry Minister)
demonstrate improved forest management (IFM) (i.e. ecosystem-based management);
undergo a feasibility assessment;
manage for permanence (e.g. plan for the event of unintentional reversal);
share economic benefits with the province; and
manage for enhanced timber supply and increased employment.

Protocol Revision

Currently, the Policy and the FCOP are being revised under the GGIRCA. Under the GGIRCA, the Greenhouse Gas Emission Control Regulation (GGECR) establishes the process for submitting a validated offset project plan for Director’s review and approval. A draft version of the FCOP 2.0 is currently in development. The new version of the protocol is expected to be more prescriptive in terms of project type, baseline scenario approach, modelling requirements, determination of leakage, and selection of sources, sinks, and reservoirs. The draft protocol will also include an added requirement for proponents to deduct a certain percentage of offset units to a government-managed contingency account to insure against reversals that may occur throughout the life of the project. It is expected that the scope of the FCOP 2.0 will apply to projects on both public and private lands.

Projects that were generating offset credits under the FCOP 1.0 have been grandfathered under GGIRCA and continue to generate offset credits. The Cheakamus Community Forest Carbon Project [15] generates carbon offsets through improved forest management, while two other projects generate offsets through conservation / avoided deforestation: 1) Quadra Island Forestland Conservation Project [16]; and 2) The Great Bear Forest Carbon Project (including the Haida Gwaii, South Central Coast, and North and Central Mid-Coast) [17].

BC Application to CORSIA

It is worth noting that the BC Offset Program was one of 14 applicants that applied to be a recognized emission unit program under the UN International Civil Aviation Organization’s (ICAO) Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) program [18]. The program was rejected by CORSIA’s Technical Advisory Body (TAB) given that the program was unable to address double of emission credits between the CORSIA program and the federal government. The TAB noted that most programs were not originally designed to support activities in a national context and that Canada’s national government would need to put in place procedures that are consistent with the criterion of avoiding double counting [19]. Currently, forest carbon offsets are incorporated into the province's progress-to-targets [20], however this is separate from the federal government’s National GHG Inventory [21].

Conclusion

If companies are looking at how jurisdictions might look to establish a regulatory framework for forest carbon offsets on public lands, the Canadian province of BC appears to provide a roadmap. There are a few core elements of this framework that we feel are essential:

Most importantly, there is clear government support for the development of a functioning forest carbon offset system through the Carbon Neutral Government Regulation. Governments do not need to commit to being carbon neutral, but in the case of BC, this commitment spurred on the development of the broader regulatory framework for forest carbon offsets.
The government has developed a robust protocol for forest carbon offsets. The protocol sets out the rules for a baseline scenario approach, modelling requirements, determination of leakage, and selection of sources, sinks, and reservoirs. The protocol is widely recognized as producing high quality offsets. The UN International Civil Aviation Organization’s (ICAO) Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) program took no issue with BC’s approach to offset protocol in its assessment by the Technical Advisory Body.
An Atmospheric Benefit Sharing Policy was developed to ensure that project proponents can use Crown land for the purposes of undertaking a forest carbon emission offset project in collaboration with Indigenous communities. Ownership over the claim that a tonne of carbon dioxide has been removed from the atmosphere is not a traditional form of property right. Therefore, government’s need to think up new frameworks that’s specifically address any atmospheric benefits. BC has led the way on developing a framework for recognizing this new property claim under the ABSA.

As a result of this framework, forest carbon offset projects in the province of BC are the only projects in Canada that are developed on public lands. In addition to being used by the BC provincial government, these credits can also be purchased by companies looking to reduce their GHG footprint on a voluntary basis. Unlike other voluntary forest carbon credits, BC credits have the added benefit of having a guaranteed purchaser of last resort, the BC provincial government. There is also an opportunity for potential market upside if there is a future link under the CORSIA program. For high-quality forest carbon offsets with limited downside risk, look no further than BC-based forest carbon credits. Voluntary purchasers can have confidence that these high-quality credits can help to mitigate climate-related financial risk under the TCFD framework.

Please get in touch

Frostbyte's sustainability services are cost effective and the broadest in the industry. Whether you require regulatory and risk consulting, data and information technology solutions, or reporting preparation services, Frostbyte can provide the solution for your needs. Please contact us.