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ClearBlue's Michael Berends Comments on Ontario's Offsets Post-2020

San Francisco, 5 October (Argus) — Ontario is proposing new rules that would allow the use of carbon offsets for compliance with the province's cap-and-trade program.

The Ontario Ministry of Environment and Climate Change yesterday released draft offset credit regulations, including the first project protocol.

The ministry says it designed the regulation and accompanying protocol to be consistent with the Western Climate Initiative's (WCI) offset system. Ontario will become the third member of the regional carbon market next year, joining California and Quebec.

The first protocol developed for Ontario will allow offset developers to earn credits for methane destroyed at landfills. The rules limit eligibility to smaller landfills because WCI requires offsets to be issued to sources of greenhouse gas (GHG) emissions that no member jurisdiction regulates. California regulators this year adopted a plan to reduce emissions of methane and other short-lived GHGs that will lead to new regulations for landfills. The Ontario protocol allows offsets for landfills that have a capacity of less than 1.5mn cubic meters if operational and less than 3mn if closed.

Ontario plans to have more protocols ready for review later this year or in early 2018. The Climate Action Reserve, which serves as an offset registry in California's cap-and-trade program, won a contract to adapt up to 13 existing protocols for Ontario and Quebec from other regulated and voluntary carbon markets.

Protocols determine how specific project types can earn offsets. California, for example, has six protocols, while Quebec has five. Forestry projects account for over three quarters of offsets issued under California's cap-and-trade regulations but are not yet eligible under the Canadian programs. Once approved, they will likely prove popular. Offset developers have already lined up a 100,000-acre tract in southeastern Ontario that could generate an estimated 75,000 metric tonnes/yr of additional GHG reductions.

Ontario's carbon market launched this year to help the province achieve a goal of reducing GHG emissions 15pc below 1990 levels by 2020. The regulation released yesterday limits offset use to 8pc of a company's compliance obligation under cap-and-trade.

California uses the same limit, but it will cut that in half starting in 2021. Some Canadian offset developers are nervous about how that could affect Ontario and Quebec. While there is unlikely to be any immediate impact to Ontario's program, which is authorized through 2020, that could change afterward.

"What will happen across the line in 2020 will be, in our understanding, a different discussion that is to come soon," said Michael Berends of the carbon market advisory firm ClearBlue Markets.

The Ministry of Environment and Climate Change is accepting comments on the proposal until 18 November.


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