The Clean Air Council (CAC) is a network of over 30 Ontario municipalities working collaboratively on clean air and climate change actions. Clean Air Partnership (CAP), a charitable environmental organization facilitates the CAC network.
To advance municipal climate action, and to achieve our national greenhouse gas reduction targets, all orders of government must work together. CAC members are keen to work with the Government of Canada to support the implementation of the Pan-Canadian Framework on Clean Growth and Climate Change, as well as the additional actions aimed at achieving a prosperous net-zero carbon emissions future by 2050.
Enclosed below is the input from CAC member municipalities related to the proposed Greenhouse Gas Offset Credit System Regulations.
CAC members have set ambitious greenhouse gas (GHG) emission reductions for 2030 and 2050 deadlines and it is likely that municipalities will need their reductions to achieve their GHG reduction targets. The offset market, however, can be of significant value in helping to enhance the business case of GHG reduction actions and enable projects that may not be cost-effective without offsets to be implemented. Offsets can be used as a mechanism to get projects implemented; whereby the offsets are sold for the years necessary to ensure the implementation of the action; and then future year reductions that have not been sold via offsets can be applied to municipal GHG reduction targets. This could accelerate action implementation or build a more robust business case that can get projects implemented that would not be able to be advanced without offset revenue added into the business case.
The CAC supports the prioritization of the proposed four project types proposed in the draft regulation:
The CAC would like to recommend that the following additional project types that are available to municipalities be identified for prioritization for future protocol development:
Ensuring a robust protocol in each of the above project types will be critical to ensuring quality offsets while also helping to increase the economics and implementation of GHG reductions in each of the above areas. As part of a project validation process, offset project protocols must be able to provide guidance for assessing additionality to ensure that the offset projects would not have occurred without the help of the offset revenue. CAC municipal members would like to work with the federal teams developing the protocols to ensure quality offsets that support the implementation of projects in each of the above areas. The CAC also recommends the federal government to use the protocol developed in other jurisdictions in each of the above areas to inform its protocol.
Prioritize Ambition over Offsets
The CAC would like to recommend that the offset protocol advance ambition above offsets. Allowing for capped entities to achieve up to 75% of their reductions via offsets results in a prioritization of offsets over ambition. The CAC recommends that the protocol allow a facility to use offsets to achieve up to 25% of the target.
Verification as an Eligible Expense
Municipalities have identified and are committed to advance significant GHG reductions within their communities via their community Climate Plans and targets. Offsets can help advance the business case of these actions and spur the implementation of community climate actions. However, it needs to be recognised that verifying offsets can be an expensive cost and can undermine the business case for project implementation. Therefore, CAC members would like to recommend that verification be an eligible cost and that the government consider that a portion of the sales of allowances be re-directed to support municipal offset verification. This will ensure that offsets are of high quality, while also supporting the business case of climate action implementation.
Do Not Use Offsets in the Electricity Sector
The electricity sector should not be one of the sectors that achieves their targets via offsets. It is not trade exposed and is critical to the national decarbonization process. Leaving electricity in the OBPS under the guise of protecting industry and consumers from near-term rate impacts will not set Canada on course to significantly deeper emissions reductions and will undermine Canada's goal to achieve a 90 per cent emissions free electricity system by 2030. One of the main impediments to the electrification of the economy using efficiency and a largely renewable system is the need for a nationally coordinated process for decarbonization of the electricity sector that explores legislative, regulatory, policy and economic reform.
Ensure a Level Playing Field Across the Country
At present, an inconsistent application of the federal carbon pricing benchmark has led to a race to the bottom, particularly in provinces like Ontario, New Brunswick, Prince Edward Island, and Newfoundland and Labrador. For example, Ontario and New Brunswick both put forward their own regulations for pricing emissions for heavy emitters (also OBPSs), however, Ontario and NB's OBPSs are significantly weaker than the federal OBPS.
Sector-specific standards are expressed as a percentage of the average emissions intensity for a sector. Facility-based standards are expressed as a percentage of the historical emission intensity of individual facilities. Hence, sector-specific standards are more effective at reducing emissions and incentivizing innovation than facility-based standards. Ontario has set sector-specific standards for 13 industrial activities and facility-based standards for about 80 facilities.
Using the federal OPBS would set sector-specific standards for 193 of the regulated facilities and facility-based standards were used for 24 facilities. The CAC does not support federal approval of Ontario's OBPS program. The federal government should close the loopholes created through these decisions. At minimum, approval in Ontario should be delayed until sufficient detail to determine if equivalency is provided.
If Canada fails to apply the benchmark consistently across all jurisdictions, it creates an unequal playing field and could leave the country vulnerable to carbon border adjustments now under consideration by the European Union and the United States.