Climate Solutions Group

Getting Ready for Ontario’s Carbon Offset Program: Offset Protocols

Forest Offset Project

14

Jun 2017

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For Ontario to have a complete cap and trade system as contemplated in the Ontario government’s announcements, there are two significant elements left to be added. Those elements are (i) the creation of a link with California and Quebec and (ii) the creation of an Ontario offset system. This article deals with an important part of the creation of an offset system, that being the drafting and approval of offset protocols. Offset protocols will inform offset developers of the type of projects that can be undertaken to produce offsets usable in the Ontario cap and trade system and consequently, after linking, in the California and Quebec systems.

Stakeholders understand the importance of offsets in moderating compliance costs and creating opportunities for entities not covered by the cap to participate in the fight against climate change through creating offsets. Stakeholders in the Ontario cap and trade system have been eagerly awaiting the development of offset protocols which are expected to completed by late 2017.

The importance of offsets as part of the cap and trade program has been clear from the time of the Ontario government’s original announcement of its decision to implement a cap and trade system. When the government published its white paper on offsets in November 2016[1], stakeholders who had been arguing that the offset system should have been the first thing created, not the last, took comfort from the government’s understanding of a number of important issues related to offsets, including the need to get protocols drafted. When the government followed that by issuing an RFP in October 19, 2015 for the creation of Ontario offset protocols and set a very aggressive timeline, including getting the offset protocols finished by December 31, 2016[2], it appeared that the offset system would be operating in very short order. However, there was a long delay before the Climate Action Reserve finally was announced as the winner of the RFP and, unfortunately, there have been numerous delays since then. As a result, it is not surprising that there is significant interest in the timetable for creating the protocols for the Ontario system.

What is an offset protocol?

An offset protocol is a set of rules relating to a set of activities (eg landfill gas capture and destruction) that must be followed in order to create a carbon offset credit. An offset developer that reduces, removes or avoids greenhouse gas emissions must know these rules before they can begin activity. If the rules aren’t followed, the offset credits will not be issued and, if the problem is found later, the offsets (in California at least) may be invalidated.

Offsets are created outside of the sectors whose GHG emissions must be “covered” (i.e. matched) by allowances and offsets surrendered to the government at the end of the compliance period. These sectors include, but are not limited to, forestry, agriculture and waste management. Over the years, the value of creating offsets outside of the covered sectors has become clearer. Offsets can be less expensive than allowances so they help keep the costs down for covered emitters to comply with the requirements of the cap and trade system. Moreover, offsets produce real reductions in GHG emissions which directly helps reduce GHG concentrations in the atmosphere.

The offset protocol rules that have been created generally rely upon specific criteria. According to Ontario’s Compliance Offset Credits Regulatory Proposal, these criteria include1:

  • Ownership of Project and Authority to Claim Offset Credits
  • Real
  • Quantification
  • Leakage
  • Additional
  • Permanent
  • Verifiable

Why Protocols are important

Offset developers, regulated emitters and investors all have a stake in the timely finalization of the protocols. The sooner offset projects get underway, the sooner they can deliver economic, social and environmental benefits, such as job creation and GHG reductions. If the protocols are in place, opportunities abound. For example, rural and remote areas can integrate offset projects into agriculture and forestry management to sequester carbon more effectively.

The Process of Adapting Protocols

At the recent Ontario Cap and Trade Forum held in late April, attendees were eager to hear an update on the status of the thirteen offset protocols in development for Ontario. The Climate Action Reserve (CAR), the organization charged with adapting offsets for Ontario is the is adapting existing protocols for Ontario[3] rather than designing new ones. Craig Ebert, the President of CAR, presented the steps required for adapting protocols and highlighted the progress made to that time and his expectations for completion of the process; a summary is set out below.

There are five groups involved in the adaptation of existing protocols to produce a new Ontario offset protocol.

  1. Consulting Team
  2. Technical Task Team
  3. Stakeholder Team
  4. Government
  5. Public, including First Nations

Based on our interpretation of CAR’s presentation at the Cap and Trade Forum, an offset protocol is adapted for Ontario through the following steps:

  • Research and identify the best practices from other jurisdictions’ protocols
  • The Consulting, Technical Task, and Stakeholder Teams review protocol candidates
  • The Consulting and Technical Task Teams draft the protocol
  • The draft protocol is reviewed by the Stakeholder Team
  • The draft protocol is revised based on feedback from the Stakeholder Team
  • The draft protocol is released for public comment and engagement, including First Nations engagement
  • Final revisions are made based on that engagement and comments received
  • The final protocol is submitted to the government for consideration and, if approved, publication as an acceptable protocol.

Adapting protocols for Ontario is obviously a significant undertaking. Despite the possibility of making the process even more onerous, CAR encourages stakeholders to be involved as part of the Stakeholder Team. Engaging a wide group of stakeholders in the process of offset protocol adaptation is seen as critical for getting the protocols right. Stakeholders interested in participating in offset protocol creation activities can fill out a Statement of Interest form and send it to policy@climateactionreserve.org.

The status of offset protocols in Ontario

The following table shows a timeline of start and completion dates for the 13 protocols planned for Ontario provided by CAR.

Offset Protocol Project Timeline

Offset Protocol Project Timeline

Note that the 13 protocols identified for adaption and then use in Ontario are all expected to be completed before the end of 2017. The Climate Action Reserve website provides updates on the current work being done on offset protocols.

Here is a rundown of where Ontario’s offset protocols are currently at[4]:

Protocol NameDraft protocol (date published for public comment)Draft protocol (date published for Stakeholder Review)Candidate protocols posted for stakeholder review (date posted)
Afforestation and Reforestation
(March 27, 2017)
Anaerobic Digestion (Organic Waste and Manure)
(April 25, 2017)
Conservation Cropping
(March 27, 2017)
Emission Reductions from Livestock (Enteric)
Forest (avoided conversion and improved forest management)
(March 27, 2017)
Grassland
(May 25, 2017)
Landfill Gas Capture and Destruction
(May 19, 2017)

(March 15, 2017)

(February 24, 2017)
Mine Methane Capture and Destruction
(March 16, 2017)

(March 1, 2017)
N2O Reductions from Fertilizer Management
(April 6, 2017)
Organic Waste Management
Ozone Depleting Substances Capture and Destruction
(March 16, 2017)

(March 2, 2017)
Refrigeration Systems
Urban Forest
(March 27, 2017)

Conclusion

In conclusion, the development of offset protocols is a complex and challenging process but central to the cap and trade program. The extensive stakeholder engagement work by CAR highlights that it is trying to incorporate a wide variety of perspectives into the protocol creation process in order to effectively navigate through complexities and create protocols that can be successfully used in the Ontario cap and trade system. Nevertheless, participation by stakeholders in the Ontario cap and trade system and keeping up to date on the status of Ontario’s offset protocols is likely to be a useful exercise. Subscribe to the Climate Solutions Group’s newsletter to stay up to date on offset protocols and other cap and trade topics.


References
[1] Ontario Government (2016) Ontario Cap and Trade Program: Offsets Credits Regulatory Proposal. Environmental Registry: Retrieved from: http://www.downloads.ene.gov.on.ca/envision/env_reg/er/documents/2016/012-9078.pdf
[2] Consulting Services – Offset Protocol Adaptation for Compliance Markets. Retrieved from: http://www.merx.com/English/SUPPLIER_Menu.Asp?WCE=Show&TAB=1&PORTAL=MERX&State=7&id=347008&src=osr&FED_ONLY=0&ACTION=&rowcount=&lastpage=&MoreResults=&PUBSORT=2&CLOSESORT=0&IS_SME=Y&hcode=czqTVJy%2FBCikroG3jD4wUg%3D%3D
[3] Climate Action Reserve (2017) Adapting Offset Protocols for Ontario, Québec, and Other Jurisdictions. Slides from Webinar, Retrieved from: http://www.climateactionreserve.org/wp-content/uploads/2017/01/Adapting-Offset-Protocols-for-Ontario-Qu%C3%A9bec-and-Other-Jurisdictions-.pdf
[4] Climate Action Reserve (2017) Adapting Offsets Protocols for Ontario, Quebec, and Other Jurisdictions. Retrieved from: http://www.climateactionreserve.org/adapting-offset-protocols-for-ontario-quebec-and-other-jurisdictions-2/

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