Canada’s first federal carbon offset market began on Wednesday as the latest piece of the carbon price puzzle for large industry takes shape.
But the arrival of the new compensation system was received without applause by climate activists who say it simply makes it cheaper for large industries to continue polluting.
Carbon offset markets allow governments, businesses, and other organizations that emit greenhouse gases to pay for these emissions by buying credits created when emissions are reduced elsewhere.
Voluntary markets (private companies raising capital for emission reduction projects such as wind farms and tree planting by selling loans to people who want to pay for their own carbon footprints) have been around for years.
Compliance markets are newer and allow carbon-paying entities to reduce the amount of emissions they have to cover by buying credit on a regulated market. Credits are almost always below the carbon price, averaging 10 to 20 percent less in existing compliance markets.
British Columbia, Quebec and Alberta already have some compliant credit systems, but so far there have been none at the national level.
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Environment Minister Steven Guilbeault said Wednesday that the new federal system is a key part of Canada’s plan to meet its 2030 emissions target and reach zero net emissions by 2050.
“Climate change is the crisis that will persist,” he said.
“That’s why we can’t take a break and we need to keep moving faster and farther.”
Environment Minister Steven Guilbeault speaks at a press conference at the GLOBE Forum at the Vancouver, BC Convention Center on Tuesday, March 29, 2022. Guilbeault said Wednesday that the new federal carbon offsetting system is a key piece of Canada’s ability to both hit its emissions target (THE CANADIAN PRESS / Chad Hipolito)
The new system is aimed at large industrial emitters that pay the federal price of carbon, but any Canadian entity can buy system compensation credits. Companies in the federal carbon pricing system can only use credit for about 75 percent of their covered emissions.
Companies that pay the federal carbon price can buy these credits to reduce the amount of carbon price they have to pay.
For now, only municipalities that install new methane collection systems in landfills will be part of the new compliance market. Over the next year, the government intends to finalize regulations to add projects that reduce emissions from refrigeration systems, forests and land management to farms.
The government said it is now also beginning to write rules to add direct air capture technology that removes carbon dioxide from the air and traps it underground.
A credit will be created for each tonne of emissions reduced by the approved projects. They will only count after being audited to ensure that these cuts are not being made to comply with existing regulations or carbon prices. Cuts must also be permanent and will be tracked in a public register.
Louise Comeau, director of climate change and energy solutions at the Conservation Council of New Brunswick, said Canada’s large industries are already being asked to do very little about their emissions.
Large emitters covered by the federal carbon price pay this cost, currently $ 50 per tonne, only between five and 20 percent of the total greenhouse gases produced.
Comeau said reducing the cost by allowing issuers to buy credit for less than the cost of the carbon price simply reduces their financial incentive to reduce their own emissions.
“It’s all ridiculous,” Comeau said.
He said emissions that are reduced to landfills and farms and forests should be reduced, in addition to the cuts needed for large industry. It’s not a situation, he said.
Shane Moffatt, head of Greenpeace Canada’s nature and food campaign, called it a “massive step backwards”.
“That doesn’t get us anywhere,” he said. “The carbon market is a shell game.”