On June 8, 2022, the federal government launched Canada’s Greenhouse Gas Offset Credit System (Credit System) in an effort to meet Canada’s emissions reduction goals.¹ The Credit System creates market-based incentives for municipalities, Indigenous communities, industry players, and individuals to implement innovative solutions to reduce Greenhouse Gas (GHG) emissions and remove GHG from the atmosphere.

The Credit System is governed by the Canadian Greenhouse Gas Offset Credit System Regulations, SOR/2022-111 (Regulations), created under the Greenhouse Gas Pollution Pricing Act, SC 2018, c 12 (GGPPA).² The Credit System was designed and created in alignment with the Pan-Canadian Greenhouse Gas Offsets Framework, which incorporates experience and expertise from Alberta, British Columbia, and Québec, who have already launched their own offset credit systems.³

Currently, only provinces which do not already have a carbon pricing system that meets or exceeds federal requirements are subject to the GGPPA and the Credit System. For example in Alberta, the TIER Act and regulations govern instead. Under the Regulations, participants to the Credit System must be registered and follow a federal protocol setting out how GHG emissions reductions or GHG removal from the atmosphere are measured. Such reductions and removals must also come from activities which are not otherwise obligated by law or falling under an existing carbon pricing system. Generated offset credits are tradeable and sellable on the market.

The first federal protocol which allows for generation of offset credits is the new Landfill Methane Recovery and Destruction protocol.⁴ Under it, landfill operators who recover landfill gas and subsequently destroy or utilize it are eligible to receive offset credits. Additional protocols applicable to the refrigeration, agricultural, and forest management sectors are currently under development. A protocol for Direct Air Carbon Capture and Sequestration technologies will also come in the near future.

The minimum price of offset credits in Canada, and thus of carbon emission, is dictated by the Pan-Canadian Approach to Pricing Carbon Pollution (Federal Benchmark), most recently updated in August 2021.⁵ The Federal Benchmark sets the offset credit price at CA$65 per tonne CO2e in 2023, and will rise by CA$15 per year to CA$170 per tonne CO2e in 2030, when it will be updated again. Purchased credits can be used to meet compliance obligations under the federal Output-Based Pricing System.

With these initiatives, the federal government hopes to stimulate private sector investment in technologies and projects which promote decarbonization, and incentivizes existing facilities to improve their carbon footprint.

Please reach out to Courtney Burton for questions related to this article.

Special thanks to Summer Law Student, Jack Yuan, who assisted in preparing this insight.

1. See https://www.canada.ca/en/environment-climate-change/news/2022/06/canada-launches-greenhouse-gas-offset-credit-system-to-support-a-clean-green-economy.html.
2. See https://gazette.gc.ca/rp-pr/p2/2022/2022-06-08/html/sor-dors111-eng.html.
3. See https://ccme.ca/en/res/pan-canadianghgoffsetsframeworken1.0secured.pdf.
4. See 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/compendium-protocols/landfill-methane-recovery-destruction.html.
5. See https://www.canada.ca/en/environment-climate-change/services/climate-change/pricing-pollution-how-it-will-work/carbon-pollution-pricing-federal-benchmark-information/federal-benchmark-2023-2030.html.