Today, the federal government has issued for public comment details of its proposed offset system by publishing draft Program Rules and Guidance for Project Proponents and Program Rules for Verification and Guidance for Verification Bodies in the Canada Gazette. The offset system is intended to encourage unregulated entities to reduce greenhouse gas emissions in Canada by issuing tradable credits for such reductions.

Under the proposed rules, a proponent would submit an application for offset project registration, which would be subject to public comment for a period of 30 days. Following registration, the government would issue credits if emission reductions were properly monitored, verified by an independent expert and appropriate reports were filed. Emission reductions are ineligible for offset credits if they are achieved in response to a climate change incentive or a legal requirement. The sale and retirement of credits would be tracked on a public registry.

The federal government has commented that its offset system may, in future, be harmonized with provincial, EU and US systems but, to date, the only proposed linkage is the acceptance of existing reporting and quantification protocols from sources such as Alberta Environment, the California Climate Action Registry and the Clean Development Mechanism of the Kyoto Protocol.

Public comments with respect to the proposed rules will be accepted until August 11, 2009, and final versions of the guidance documents (including the Guide for Protocol Developers issued in August 2008) are to be published in the fall. Certain submission deadlines may arise within weeks of such publication. Limitations of the proposed offset system, such as the inability to obtain credit for reductions achieved prior to January 1, 2011, and the restriction on registration beyond two eight-year periods, will likely be the subject of public comment and further policy consideration. Companies considering offset projects will want to consider next steps in light of the details made available today.

Click here for Program Rules and Guidance for Project Proponents

Click here for Program Rules for Verification and Guidance for Verification Bodies

If you would like additional information, please contact Alexandria Pike (416.367.6989) or Sarah Powell (416.367.6931) in our Toronto office or Michel Pelletier (514.841.6455) or Marc-André Boutin (514.841.6527) in our Montréal office.

Davies Ward Phillips & Vineberg LLP, with over 250 lawyers, practises nationally and internationally from offices in Toronto, Montréal, New York and an affiliate in Paris and is consistently at the heart of the largest and most complex commercial and financial matters on behalf of its North American and overseas clients.

The information and comments herein are for the general information of the reader and are not intended as advice or opinions to be relied upon in relation to any particular circumstance. For particular applications of the law to specific situations, the reader should seek professional advice.