The Government of Canada is developing a federal GHG offset system. In July 2020, ECCC published a discussion paper entitled Carbon Pollution Pricing: Considerations for Protocol Development in the Federal Greenhouse Gas Offset System [1]. The paper provides additional details and design considerations for the Federal GHG Offset System (“the System”), with a focus on protocol development. This discussion paper builds on a previous discussion paper called Carbon Pollution Pricing: Options for a Federal GHG Offset System [2], released in June 2019, and the Canadian Council of Ministers of the Environment (“CCME”) Pan-Canadian Greenhouse Gas Offsets Framework [3] (“Offsets Framework”) that sets out guidance to jurisdictions that are developing or operating an offset program.
In the previous blog, we provided an overview of the Offsets Framework design recommendations [4] and guidance on specific design elements [5]. We also released a blog overviewing details of the System as set out in the June 2019 discussion paper [6]. In our last update, we highlighted some of the information provided in the July 2020 discussion paper including updates on key policy elements and details on protocol development [7]. In this blog post, we continue our review of the July 2020 paper focusing on the protocol development process, design considerations, and development phases.
Protocol Development Process
Protocols specify the mandated requirements for project planning and operating expectations, including monitoring and data management requirements, for greenhouse gas (GHG) emissions reductions or removal enhancement projects. Once a project type is selected for protocol development by Environment and Climate Change Canada (“ECCC”) an on-line notification and development schedule will be posted. ECCC will then establish a Technical Expert Team to advise on the protocol development process and provide expert review of the draft protocols.
A key step in the process is the development of a protocol scoping document. The scoping document contains information such as:
- Assessment of existing protocols that could be adapted into a federal offsets protocol
- Definitions of project boundaries
- An assessment of the protocol against eligibility criteria
- The potential update of the protocol including the marginal cost of reducing or removing GHGs
- A comparison of baseline and project sources, sinks, and reservoirs (SSRs)
- Baseline options are rationales for approved baseline approaches
- An assessment of factors that relate to GHG reversals for sequestration projects.
Project proponents may want to submit a scoping document to ECCC in cases where there is a project that does not yet have a protocol approved or under consideration. In these cases, ECCC will consider the scoping document, but makes no guarantees that a protocol development will be initiated. Scoping documents can be based on existing protocols in other offset systems.
The scoping document will serve as a seed document for the federal offset protocol. Once ECCC has prepared a draft protocol, it will be review by members of the Technical Expert Team and subject matter experts within government. The draft protocol will then be published in Canada Gazette, Part I for public comment. Once finalized, the protocol will be published in Canada Gazette, Part II. ECCC has noted the need for offset protocols to be regularly reviewed. As baseline conditions evolve the offset protocol will be updated. ECCC has stated that the protocol development schedule and status will be posted on the Federal GHG Offset System web page [8]. The possible offset protocol statuses are outlined in Figure 1.
Figure 1 – Possible status of federal offset protocols
Protocol Design Considerations
Protocols will be designed using an “umbrella approach”. Under this approach, a basic set of requirements will be established for each protocol. These basic requirements will not vary by geographic region and relate to quantification, monitoring and verification. Modules will then supplement the basic requirements depending on specific locations, management practices, and applications. For example, an electricity grid displacement factor will vary by geographic region resulting in higher avoided GHG emissions in areas that use more fossil fuels in electricity generation. ECCC is also requiring certain safeguards to protect the environment beyond carbon sequestration or removal. In most cases, offset projects have positive environmental benefits (e.g. reforestation has positive biodiversity benefits), but this may not be the case for all offset projects.
ECCC is proposing the use of standardized baselines for determining GHG emission reductions. The baseline is the scenario that would have occurred in the absence of the offset project. Standardized baselines use the same emission factors, quantification methodologies, and assumptions. It is possible that a project proponent would be able to choose between multiple standardized baselines. In this case, the baseline that is chosen must be the most applicable based on geographic and project considerations. It is also possible that projects may not be able to use a standardized baseline. For example, some baselines are highly sensitive to project-specific conditions. In these cases, the baseline used by the project proponent would need to be verified by an accredited verification body.
Protocol Development Phases
Perhaps the most significant development in the July 2020 discussion paper is the release of a shortlist of priority project types. ECCC has stated that these offset protocols will be the first to be considered in the initial phase of protocol development. These protocol types are outlined in Figure 2.
Figure 2 - Priority project types for federal offset protocol development
Conclusion
In this newsletter, we provided an overview of the protocol development process, design considerations, and development phases. Importantly, ECCC’s shortlist of priority project types offers valuable insight for offset project developers looking to get a head start in jurisdictions where the federal offset system will apply. The draft offset regulations are targeted for publication in Canada Gazette, Part I in fall 2020, but ECCC has stated that the protocol development process will occur in parallel. Offset project developers therefore do not need to wait until fall of 2020 to get started on project design. Developers may even get early insight into the protocol requirements by participating in ECCC’s Technical Expert Team. There is likely to be a significant advantage for early-actors in the federal offset system. Now is the time to begin project design and engaging in the protocol development process.
References
[1] https://www.canada.ca/en/environment-climate-change/services/climate-change/pricing-pollution-how-it-will-work/output-based-pricing-system/federal-greenhouse-gas-offset-system.html
[2] https://www.canada.ca/content/dam/eccc/documents/pdf/climate-change/pricing-pollution/Options-GHG-Offset-System.pdf
[3] https://www.ccme.ca/files/Resources/climate_change/Pan-Canadian%20GHG%20Offsets%20Framework%20EN%201.0%20secured.pdf
[4] https://us12.campaign-archive.com/?u=9260b91e2aab82400d1bb3232&id=b6cec9e2f7
[5] https://us12.campaign-archive.com/?u=9260b91e2aab82400d1bb3232&id=ce423c06af
[6] https://mailchi.mp/fab7d777a996/options-for-a-federal-greenhouse-gas-offset-system
[7] https://mailchi.mp/576447cd6941/protocol-development-in-the-federal-ghg-offset-system-part-1
[8] https://www.canada.ca/en/environment-climate-change/services/climate-change/pricing-pollution-how-it-will-work/output-based-pricing-system/federal-greenhouse-gas-offset-system.html