|August 11, 2005|
Canada to establish emissions trading market
|Vancouver, Canada - The federal government has taken another step to honour Canada's Kyoto commitment by proposing a set of rules for a domestic offset credit system designed to reward innovation and provide incentives to reduce greenhouse gas (GHG) emissions.|
The government has issued a Consultation Paper setting out the system's proposed rules. Following consultations with provinces, territories, industry and aboriginal groups, the system is to begin operating early in 2006. Public comments on the proposed system will be open until September 30, 2005.
Such an offset credit regime was promised in the Kyoto implementation plan released earlier this year entitled "Moving Forward on Climate Change: A Plan to Honour Our Kyoto Commitment."The plan is an integral part of Project Green, the overall strategy for Canada's environment.
See related article "Project Green - $10 Billion and counting"
In releasing the Discussion Paper, Environment Minister Stéphane Dion said, "Enacting this system is a major step forward for our climate change plan. Consultations will maximize its effectiveness in directing innovation to reduce greenhouse gas emissions for cleaner air, a healthier environment and a strong, sustainable, competitive economy."
Similar to the offset credit system launched in Europe earlier this year the proposed regulations provide credit-based incentives for Canadian projects that reduce or offset overall GHG emissions. It is hoped that such a system will encourage innovation and sustainable practices, allowing Canada to meet its Kyoto target of reducing emissions to 6% below 1990 levels while still maintaining strong economic growth.
Much of the reduction will come from Canada's 800-plus Large Final Emitters (LFEs), which produce close to 50% of Canada's total GHG emissions. These companies are concentrated in the oil and gas, mining and manufacturing, and thermal electricity sectors. LFEs will be required to reduce overall emissions by as much as 12% (55 mega tonnes) using a variety of technologies and strategies.
Reduction of emissions through internal process changes and technology improvements is hoped to be the preferred choice, as companies will then benefit from increased efficiency over the long-term. They may also purchase 'offset credits' equivalent to their required reductions, or contribute to the Greenhouse Gas Technology Investment Fund that will develop and commercialize Canadian technologies designed to achieve emission reductions over the long term.
Offset credits may be purchased from other LFEs, or domestic and international offset markets. All purchased credits must qualify under the Kyoto accord to attest to a real reduction in GHG emissions.
Canadian credits will be tradable on international markets, allowing Canadian companies and traders to enter what has become a high area market for investors. Credits can be earned two ways: through reduction in GHG emissions, or through sequestration.
Examples of potential offset projects include: