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Overview: Canadian Greenhouse Gas Offset Credit System Regulations under the Greenhouse Gas Pollution Pricing Act

The Canadian Greenhouse Gas Offset Credit Regulations (the Regulations) made under the Greenhouse Gas Pollution Pricing Act (GGPPA) establish Canada's Greenhouse Gas (GHG) Offset Credit System (the GHG Offset Credit System). Offset credits will be issued to proponents - regulated parties responsible for offset projects under the Regulations - for GHG reductions from projects implemented in accordance with the Regulations and the applicable federal offset protocol.

A federal offset protocol is a set of requirements for project implementation applicable to a specific project type that proponents of offset projects must follow in order to generate federal offset credits. A protocol establishes the quantification methodology for calculating the GHG emission reductions or removals generated by an offset project, and includes other requirements such as relating to project eligibility, monitoring, reporting and verification. Federal offset protocols are listed in the Compendium of Federal Offset Protocols and are published on Canada's Greenhouse Gas (GHG) Offset Credit System webpage.

The information contained in this document intends to highlight key requirements in the Regulations, primarily related to non-sequestration projects. The material is not legal advice and does not provide an interpretation of the law. In the event of any conflict or discrepancy between this information and the GGPPA or the Regulations, the GGPPA or the Regulations shall prevail. Proponents are advised to become familiar with the GGPPA, the Regulations and the federal offset protocol applicable to their project to ensure a full understanding of legal obligations.

Who do the Regulations apply to

A proponent is the personNote de bas de page 1 responsible for a project in the GHG Offset Credit System. Although participation in the GHG Offset Credit System is voluntary, once a project is registered the proponent is subject to the Regulations. The Regulations include conditions for registering a project; requirements for proponents; issuance of offset credits; and requirements for keeping and retaining records.  

Related sections in the Regulations: Definitions, Section 3, 4

Who can register a project

Projects must be registered by proponents. Proponents must meet the following conditions in order to register a project:

An application to register a project or an aggregation of projects can only be made by a proponent or their authorized official. An authorized official is an individual named by the proponent that is authorized to act on behalf of the proponent. If the proponent is an individual, the authorized official may be that individual or another individual. If the proponent is a corporation, the authorized official must be an officer of the corporation. The proponent must identify the authorized official who acts on their behalf in their registration application.

Related sections in the Regulations: Definitions, 8(1), 9(1), 9(3), Schedule 1(1), Schedule 2(1)

What does it mean for a proponent to have exclusive entitlement to claim offset credits and to have necessary authorizations to carry out project activities

Having exclusive entitlement to claim offset credits means that no one other than the proponent may claim the same GHG reductions generated by the project that are eligible for offset credit issuance. In other words, proponents must have full or exclusive right to all GHG reductions for which they receive offset credits. This provision prevents double counting of GHG reductions and/or removals.

Proponents are responsible for ensuring that they have exclusive entitlement to claim offset credits for the GHG reductions generated by their project and must have documents to support that entitlement. Documentation demonstrating exclusive entitlement needs to be obtained by the proponent prior to registration. The Regulations do not prescribe the documents required to demonstrate exclusive entitlement, however these might include documents such as contracts, documents demonstrating full ownership of the project (e.g., demonstrating equipment and/or land ownership), and funding agreements with clauses related to entitlement to reductions or offset credits and/or participation in offset systemsNote de bas de page 2.

Having the necessary authorizations to carry out the project activities means that the proponent has the appropriate permissions to undertake the project. The proponent of a project (or in the case of an aggregation of projects, the persons carrying out the project activities) located on private property not owned by the proponent or that uses equipment not owned by the proponent, must have a declaration signed by the owner stating that they authorize the use of their land or equipment to implement the project. Other examples of documentation that may demonstrate necessary authorizations to carry out the project activities may include documentation demonstrating that the proponent is the owner of the private property on which the project is being carried out. Some offset protocols may include additional requirements in relation to what may be required for a proponent to demonstrate they have authorization in relation to the specific activity covered by the protocol.

Documents demonstrating exclusive entitlement to claim offset credits or authorizations will need to be reviewed and confirmed to appropriately demonstrate entitlement to offset credits or to carry out the project activities by the verification body as part of the verification of the project report.

To satisfy the conditions of registration related to exclusive entitlement and authorizations, proponents must attest in their project registration applications that they have exclusive entitlement to claim the offset credits issued for the GHG reductions generated by their project, that they have authorizations to undertake their project, and that they have the documents to demonstrate that entitlement and those authorizations. Registration of a project does not represent a confirmation by Environment and Climate Change Canada (ECCC) of these attestations. As noted above, confirmation will be conducted by the verification body.

Related sections in the Regulations: 8(1)(b), 8(1)(c), 8(3), Schedule 1(1)(e) and (g), Schedule 2(1)(d) and (e), Schedule 2(2)(c)

I'd like to register an offset project. How do I know if my project is eligible under Canada's GHG Offset Credit System

A project is eligible to be registered in the GHG Offset Credit System if it started on or after January 1, 2017, if the project and proponent meet conditions of registration in sections 8 or 9 of the Regulations, including ensuring the reductions expected to be generated are additional and unique, and if the project is, or will be, implemented using a federal offset protocol listed in the Compendium of Federal Offset Protocols.

Related sections in the Regulations: Section 2, 4, 8, 9

What is aggregation and how does it work

The Regulations allow for the aggregation of projects. Aggregation is the grouping of projects located in the same province, using the same version of a protocol and under the responsibility of the same proponent in one registration under the GHG Offset Credit System. Aggregation allows projects in an aggregation to be subject to specific provisions that may bring project cost savings while fully maintaining offset credit quality and environmental integrity.

Unless otherwise specified, all provisions of the Regulations apply, with any modifications that the circumstances require, to an aggregation of projects. Additional or modified requirements applicable to an aggregation of projects apply to project registration; project reporting; calculation of material discrepancies; verification site visits; content of reversal reports; and applications for transfers of projects. Protocols may also contain additional or modified requirements related to an aggregation of projects.

Related sections in the Regulations: 1(4), 9, 20(3), 24(3), 27(2), 37(3), 43(1), Schedule 2, Schedule 4

I already registered my project in a voluntary offset system. Can I move into Canada's GHG Offset Credit System

Projects registered under a voluntary offset system can transition into the GHG Offset Credit System, as long as all conditions of registration of the Regulations and requirements in the applicable federal offset protocol are met, the project started on or after January 1, 2017, and registration in the voluntary program is cancelled. However, offset credits generated by the project in the voluntary offset program would not be eligible as federal offset credits under the GHG Offset Credit System. Federal offset credits can only be issued by the Minister for project reports submitted by a proponent with a registered offset project, for a reporting period that begins after registration in the GHG Offset Credit System.

Registration applications for a project or an aggregation of projects previously registered in a voluntary system must include a statement that the project is no longer registered in the other system, and must provide the name of the system in which the project was previously registered, its project registration number in that system, its registration date in the other system and the date on which the registration was cancelled.  ECCC hopes to be able to work iteratively with the proponent so that eligibility can be confirmed prior to cancelling registration in the voluntary offset system and thereby permit the project to be registered in the GHG Offset Credit System.

The Regulations include flexibility around registration deadlines for projects transitioning into the GHG Offset Credit System. See Deadlines to submit an application for registration. The Regulations also include exceptions for the initial crediting period duration. See For how long can a project generate offset credits.

It is important to note that the ability to transition into the GHG Offset Credit System may also depend on the rules of the voluntary offset system. This may be especially important for biological sequestration projects that have contributed credits towards an environmental integrity account or buffer pool in the voluntary offset system.

Related sections in the Regulations: 5(4), 8(1)(g), 10(1) and (2), Schedule 1(2)(p), Schedule 2(3)(o)

Are offset projects that receive direct financial incentives from a funding program eligible for registration in Canada's GHG Offset Credit System

ECCC recognizes that multiple incentives may be needed to overcome barriers to undertaking offset projects.

A direct financial incentive in the context of the GHG Offset Credit System is any form of cash transfer, grant, or program funding (excluding tax incentives and loan guarantees) for the specific purpose of achieving a measured mitigation of GHGs.

The Regulations allow for complementarity with funding programs, including government programs, as long as the proponent retains exclusive entitlement to claim the offset credits issued for the GHG reductions generated by the project. However, some government funding programs may fully restrict participation in offset systems in the terms of their agreements. If the terms of the funding agreement do not restrict exclusive entitlement to GHG reductions achieved by the project or otherwise restrict the project's eligibility to participate in an offset system, the proponent will be required to provide information on the direct financial incentives received as part of their application for project registration.

Related sections in the Regulations: Schedule 1(1)(f), Schedule 2(1)(f)

Where do projects need to be located to register in Canada's GHG Offset Credit System

Projects need to be located within Canada to be eligible to register in the GHG Offset Credit System. A project cannot be situated in more than one province. If a project is situated in more than one province, the proponent must register the portion of the project situated in each province as distinct projects. All projects included in an aggregation of projects must also be situated in the same province or territory. Federal offset protocols may also establish additional requirements related to project location and geographic boundaries specific to the activity type covered by the protocol.

Related sections in the Regulations: 8(4), 9(1)(b)

Can offset projects be part of Canada's GHG Offset Credit System if they are located in the province that also has an offset credit program

Possibly. The GHG Offset Credit System applies nationally. However, the GHG Offset Credit System is designed to complement, rather than compete, with offset credit programs in provinces or territories.

Federal offset protocols are applicable in all provinces and territories in Canada, except for jurisdictions where the same project activity is covered by an active protocol in a compliance-based provincial or territorial offset program. In other words, a project is not eligible to register in the GHG Offset Credit System under a federal offset protocol if the project is located within a province or territory with an offset program:

In the event that a provincial or territorial compliance-based offset program does not have a published protocol for a project activity that is covered by a federal offset protocol, the proponent may be able to register in the GHG Offset Credit System.

Where a province or territory with a compliance-based offset program implemented under a carbon pricing regime publishes a protocol for the same project activity after the federal protocol is published:

After six months, the proponent must register any new projects in the provincial or territorial offset credit system.

Related sections in the Regulations: 8(1)(i), 8(2)

Can I use a protocol that has been approved for use in another system, including a provincial offset program, to generate credits in Canada's GHG Offset Credit System

No. Federal offset credits cannot be generated using protocols approved for use in a provincial offset program or under a voluntary offset program. Projects applying for registration under the GHG Offset Credit System must indicate the title of the federal offset protocol that is applicable to their project, and if more than one version of the protocol is included in the Compendium of Federal Offset Protocols, the date of the applicable version. The most recent version of the applicable federal offset protocol which has been listed in the Compendium of Federal Offset Protocols must be used.

Related sections in the Regulations: 4(1), 6(1), Schedule 1(2)(d), Schedule 2(4(a)

What are the deadlines to submit an application for registration

Deadlines for submission of a project registration application depend on whether the project starts before or after an offset protocol is listed in the Compendium of Federal Offset Protocols. If the project start date is before the date on which a protocol is listed in the Compendium of Federal Offset Protocols, an application for registration of the project must be submitted within 18 months after the date the protocol applicable to the project is listed in the Compendium of Federal Offset Protocols; and no more than 10 years after the project start date. If an applicable protocol is already listed in the Compendium of Federal Offset Protocols prior to the project start date, an application for registration of the project must be submitted within 18 months of the project start date.

Exception for projects transitioning to the GHG Offset Credit System from voluntary programs: If the project is already registered in a GHG offset credit system, other than a system administered by the federal or a provincial government (i.e. in a voluntary system), an application to register that project in the GHG Offset Credit System may be submitted any time up to 10 years after the project start date.

Related sections in the Regulations: Definitions, Section 10

How do I submit a project registration application

All project registration applications must be submitted to the Minister through the Credit and Tracking System (CATS).

Proponents seeking to register their first project must submit a request to open a GHG Offset Credit System account. Project registration is included in the account opening process. Proponents that already have a GHG Offset Credit System account must submit any additional project registration applications, or applications to register an aggregation of projects, through their account.

All project registration applications must meet requirements in section 8 or section 9(1) to (3), as applicable, and include information required in Schedule 1 (non-aggregated projects) or Schedule 2 (aggregations of projects) of the Regulations. Requests to open an account and to register a project or an aggregation of projects must be made using the forms and templates provided by ECCC. More information on how to obtain the templates is available under the CATS tab on Canada's GHG Offset Credit System webpage. See CATS: GHG Offset Credit System Account Opening and First Project Registration User Guide for instructions on how to request an account and register your first project.

Related sections in the Regulations: 8, 9(1)-(3), 41, Schedule 1, Schedule 2

What if I would like my submitted information to be treated as confidential

Subject to subsections 254 and 255 of the Act, the Minister may make available to the public the following information with respect to a project: the name of the proponent, the project registration number, the project location, the project start date, and the number of offset credits issued against the project, project reports, corrected project reports, reversal reports, verification reports, and monitoring reports submitted.

When submitting a project registration application or a report through CATS, if a proponent wishes to request that information included in the application be treated as confidential under Sections 254 and 255 of the Act, they must make a written request, with supporting justification, that the information be treated as confidential at the time of submitting the information through CATS. As part of this written request, the proponent must:

The Minister will review the request for confidentiality submitted by the proponent and proceed in accordance with section 255 of the Act.

Related sections of the Regulations and GGPPA: section 46 of the Regulations, sections 254 and 255 of the Act

Can a project participate in both Canada's GHG Offset Credit System and the Clean Fuel Regulations

There are some project activities that could be incentivized either via the GHG Offset Credit System or the Clean Fuel Regulations. This is particularly relevant for project types that aim to reduce emissions from the recovery, utilization and destruction of methane.

As a condition of registration in the GHG Offset Credit System, GHG reductions generated by a project cannot receive credits under another GHG reduction mechanism for the same reductions. Proponents must attest through statements included their registration application and their project reports that this is the case. These requirements prevent double counting and ensure that reductions and removals for offset credits are unique – which is among key requirements for credit issuance.

As such, projects creating credits under the Clean Fuel Regulations would not be able to seek credits under the GHG Offset Credit System for the same emission reductions / removals. However, a personFootnote 1   in theory could have projects registered in the GHG Offset Credit System and under the Clean Fuel Regulations (or other programs) at the same location, as long as the activities in those projects that are generating credits under each program are different and distinct (and as such, the projects and GHG reductions generated are distinct). For example, a landfill owner of a single landfill may be able to register projects under each regulation as long as they are separate activities generating unique reductions.

Related sections of the Regulations: 7(d), 8(1)(h), 9(1)(c), Schedule 1(2)(q) and (r), Schedule 2(3)(p) and (q)

For how long can a project generate offset credits

The length of time a project can generate offset credits is called the crediting period. Unless otherwise provided in the applicable protocol, projects may generate offset credits for:

If a project was previously registered in a GHG offset credit system other than the one set out in the Regulations (i.e. in a voluntary offset system), the crediting period is decreased by the period of time for which the project was receiving credits in the other system.

A proponent may request that the Minister renew a crediting period in respect of project or an aggregation of projects provided the requirements outlined in section 16 of the Regulations are met. In the case of forestry projects, the crediting period can be renewed a total of no more than 100 years including all renewals. For all other project types, the crediting period can be renewed no more than 2 times.

Related sections in the Regulations: 5, 16

When does a crediting period begin

The crediting period begins on the day on which the project is registered, or the project start date, whichever is later. The project start date is the date that project activities begin, as determined in accordance with the applicable protocol.

Exception for agricultural projects: Subsection 5(3) of the Regulations specifies that if a project is agricultural in nature, the protocol may require the crediting period to begin on the date of the start of the growing season. However, that date cannot be earlier than the day on which the project is registered or the project start date, whichever is later.

Subject to subsection 6, the crediting period for an aggregation of projects begins on the day on which the aggregation of projects is registered under the Regulations, or on the earliest project start date of any of the projects in the aggregation at the time of registration, whichever is later. However, no project in an aggregation of projects can generate offset credits until its own project start date begins, even if the aggregation has a crediting period start date that is earlier. The crediting period for all projects contained in an aggregation ends on the same day (even if the projects contained within the aggregation have different project start dates).

Related sections in the Regulations: Definitions, 5

What are the requirements that the proponent must meet when they are ready to request issuance of offset credits

To be issued offset credits, a proponent must meet the requirements outlined in section 7 of the Regulations, including preparing a project report and having it verified by an accredited third party. The project report must be submitted together with a verification report within 6 months of the end of the reporting period. Conditions for registration must continue to be met at the time of the preparation of the verification report. Refer to How long can I go before I need to submit a report for flexibilities around reporting period durations.

Related sections in the Regulations: 7, 19, 20, 24-27

Additional requirements for sequestration projects:

Proponents of sequestration projects using quantification methods requiring monitoring for GHG reversals must have met obligations with respect to implementation of their reversal risk management plans must have monitored their project, and submitted a monitoring report. Refer to Do the Regulations allow for flexibility in quantification approaches to be used by sequestration projects for more information on quantification methods for sequestration projects and related requirements.

Related sections in the Regulations: 7(h), 21(2), 22

How long can I go before I need to submit a report

The length of time over which the GHG reductions generated by the project are quantified and reported to ECCC is called a reporting period. The initial reporting period must cover 12 months following the start of the first crediting period. After that, the length of subsequent reporting periods is left up to the proponent to decide. Reporting periods can extend up to 6 years after the end of the period covered in the last project report for sequestration projects and up to 3 years after the day on which the period covered by the last project report ended for other project types. However, proponents may submit more frequent project reports for credit issuance if they want. Projects can only generate offset credits for the length of the crediting period.

Related sections in the Regulations: 20(7)

Where can I find the global warming potentials (GWPs), emission factors and reference values to use for determining GHG reductions generated by my project

Schedule 3 of GGPPA sets out the GWPs that must be applied in the context of federal carbon pollution pricing. The GGPPA is aligned with the GWPs used for reporting Canada's total GHG emissions in Canada's National Inventory Report so that accounting for GHG emissions reductions is done in a consistent way. Protocols refer directly to Schedule 3 of the Act rather than specifying the GWPs themselves.

Proponents must quantify the GHG emission reductions and removals from their project using the applicable emission factors and reference values set out in the Emission Factors and Reference Values document which can be found under the Protocols tab of Canada's GHG Offset Credit System webpage.

Related sections in the Regulations: 19(1)

How are GHG reductions quantified

The GHG reductions achieved by a project is equal to the difference between the GHGs that would have been emitted or removed under a baseline scenario - i.e. under conditions that would have occurred in the absence of the project - and the GHGs emitted or removed under a project scenario, due to the project activities undertaken due to the implementation of the project. These GHG reductions must be quantified by calendar year and must determined in accordance with the applicable formula provided in Section 20 of the Regulations, based on whether the project is:

The applicable protocol outlines how to quantify GHG reductions in accordance with the formulas provided within section 20 of the Regulations.

Related sections in the Regulations: 19, 20

Do the Regulations allow for flexibility in quantification approaches to be used by sequestration projects

The Regulations contain the flexibility for protocols to include tonne-tonne, tonne-year and/or hybrid tonne-year quantification methods for sequestration projects. All methods are based on a core requirement to achieve a 100-year climate benefit for each tonne of carbon dioxide equivalent reduced by an offset project. In other words, the amount of time one tonne of carbon dioxide equivalent must be removed and maintained out of the atmosphere to fully compensate the effect of a one-tonne emission is 100 years. This metric is the policy standard agreed globally.

Sequestration projects will use the tonne-tonne quantification approach by default unless the protocol indicates that the tonne-year or hybrid tonne-year quantification methods may be used by projects using the protocol.

The tonne-tonne method quantifies GHG reductions based on the mass of carbon dioxide equivalent (CO2e) removed and sequestered. The tonne-tonne method includes requirements for proponents to prepare a reversal risk management plan and to monitor the project for GHG reversals for a period of 100 years after the end of the crediting period in order to meet the 100-year climate benefit requirement. Tonne-tonne quantification methods are typically used in offset protocols as it is a well-established approach and is less complex compared to the other quantification methods.

Related sections in the Regulations: Definitions, 21 and 22(1)

What is leakage and how is it taken into consideration

Leakage occurs when the efforts to achieve GHG reductions from carrying out a project result in release of GHGs in another location, thereby resulting in no net GHG reductions. There are generally two types of leakage: "activity-shifting leakage" and "market-shifting leakage".

Offset protocols contain provisions to conservatively account for activity-shifting and/or market-shifting leakage associated with the project type, if applicable. This can take the form of a discount factor applied to the total amount or a portion of GHG reductions generated by a project, resulting in fewer offset credits issued to the proponent. For some protocols, the leakage risk is considered insignificant and a leakage discount factor is not applied (e.g. the Landfill Methane Recovery and Destruction protocol). Proponents must state the leakage discount factor set out in the protocol that applies to their project in their project registration application and their project reports, if applicable.

Related sections in the Regulations: 20, Schedule 1(2)(j), Schedule 2(3)(i), Schedule 3(2)(g) and (l), Schedule 4(3)(e) and (j)

What are the key verification requirements

In order to be issued offset credits, third-party verification reports must accompany project reports, corrected reports, reversal reports, and monitoring reports. An accredited verification body must conduct verification activities in accordance with ISO 14064-3, Greenhouse Gases – Part 3 – Specification with guidance for the verification and validation of greenhouse gas statements, to make a determination to a reasonable level of assurance as to whether the accompanying report meets the requirements in subsection 24(1) of the Regulations. Schedule 5 of the Regulations sets out all information required in a verification report.

Requirements for verification bodies and verification teams are listed in section 23 of the Regulations. Requirements relating to what must be verified for the applicable report, including regarding how to determine whether a material discrepancy exists in a project report, corrected project report, or a reversal report are included in section 24. Proponents must ensure that no real or potential conflict of interest exists between any party involved in the project and the verification body. This includes members of the verification team and any individual or corporate entity associated with the verification body. Section 26 of the Regulations provides limits on the number of verifications a verification body can perform on a project. Requirements for project site visits by the verification body are included in Section 27.

Related sections in the Regulations: 20(7), 20(9), 20(11), 22(1), 22(2), 23, 24, 25, 26, 27, 32(3)(b), 37(2), Schedule 5

I'd like to buy or trade federal offset credits. How can I participate in the Offset Credit System

Participation in the GHG Offset Credit System is currently limited to proponents. Given the launch of the GHG Offset Credit System in June 2022, federal offset credits have not been issued yet. Federal offset credits will be issued to proponents after projects are registered and have demonstrated that GHG reductions have been achieved in alignment with regulatory and protocol requirements (see What are the requirements that the proponent must meet when they are ready to request issuance of offset credits). Information on registered offset projects and issued offset credits will be available on a public registry. The link to the public registry will be available from Canada's GHG Offset Credit System webpage.

The Credit and Tracking System (CATS) used to administer the GHG Offset Credit System tracks registration, reporting, offset credit issuance, and the transfer and use of federal offset credits. CATS is expected to be expanded in 2024 to include a new account type for other market participants, including organizations or businesses with a business number issued by the Canada Revenue Agency, or a public body/government, who wish to participate in the federal surplus and offset credit market to trade or use these credits. This account type will allow credits to be transferred to other account holders, or to be voluntarily cancelled. The purchase of offset credits will be through transactions outside of CATS.

Related sections in the Regulations: Section 46, Output Based Pricing System Regulations section 76

How can I learn more

Refer to Canada's GHG Offset Credit System webpage for further information on the Regulations, the protocols, the Credit and Tracking System, and related guidance. For questions or comments regarding the GHG Offset Credit System, you may reach us at creditscompensatoires-offsets@ec.gc.ca or by phone at 1-833-849-9160.

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