Ontario's carbon offsets programs

Carbon offsets

A carbon offset is a term to describe the environmental benefit from an initiative that avoids, reduces or removes greenhouse gases from the atmosphere. An offset credit may be used to compensate for greenhouse gas pollution emitted by another source.

Ontario's carbon offsets programs

Ontario is developing two distinct carbon offsets programs, each with its own set of rules and requirements.

One program will generate offset credits for use in Ontario’s cap and trade program that puts a cap on greenhouse gas pollution; the other will be for use by organizations and companies who want to voluntarily reduce greenhouse gases.

Ontario Offset Credits regulation

On January 1, 2018 a new regulation came into effect (O. Reg. 539/17) to allow for the creation of offset credits that can be traded in the carbon market and used to meet compliance obligations under the cap and trade program. The regulation allows Ontario to issue offset credits to individuals, companies and organizations for eligible initiatives that reduce or avoid greenhouse gas emissions, or remove greenhouse gases from the atmosphere, and that follow rules in the regulation and in an approved protocol.

Ontario currently has three approved protocols for greenhouse gas reductions at eligible landfills, coal mines and for the collection and destruction of ozone depleting substances (ODS) Now that the regulation is in force, and the three protocols are in place, applications to register landfill gas, mine methane capture (MMC) and ODS initiatives can be made.

Ontario allows organizations and companies subject to the cap and trade program regulation to use offset credits to help meet up to eight per cent of their compliance obligations.

Offset credits will encourage innovation while giving regulated facilities lower-cost options and flexibility in how they meet their compliance obligations.

The regulation was posted to the environmental and regulatory registries for a 45-day review, ending November 18, 2017. Ontario consulted the public on a draft offset credit regulatory proposal which was posted on the environmental and regulatory registries for 45 days, ending December 30, 2016.

Carbon offset credits

Under the Ontario Offset Credits regulation, to be eligible for an offset credit, an initiative must:

• avoid, reduce or remove at least one tonne of carbon dioxide equivalent from the atmosphere
• meet the rules set out in the regulation, including the relevant protocols
• not claim reductions of greenhouse gas emissions that are covered by the cap and trade program, or that have already been credited under some other offset program

Offset credits will create financial incentives inherent in emissions trading to encourage companies, people and organizations not covered by the cap and trade program to implement projects to fight climate change. At the same time, offset credits will encourage innovation while giving regulated facilities covered by the cap and trade program lower-cost options and flexibility in how they meet their compliance obligations.

How to participate in Ontario’s compliance offset credits program

Who is eligible

An individual, a corporation, a partnership or a sole proprietorship can be a sponsor if certain criteria are met. For example, the sponsor must be a registered participant, authorized to register the offset initiative and live in Canada if an individual.

In the case of a sponsor that is not an individual, the sponsor must have an establishment in Canada. Please review the Ontario Offset Credits regulation for more detailed eligibility criteria.

How to apply

To participate in Ontario’s compliance offset credits program you must:

• be a registered participant in the Compliance Instrument Tracking System Service (CITSS)
• register an offset initiative
• apply for offset credits

Step 1: register in CITSS

Are you registered as a participant in the Compliance Instrument Tracking System Service (CITSS)? CITSS is used by registered participants in Ontario’s cap and trade program to track greenhouse gas emission allowances as well as offset credits.

• Learn how to register in CITSS
• If you are registered in CITSS - review the eligibility requirements in the Ontario Offset Credits regulation and the applicable offset protocol.

Step 2: register an offset initiative

To register an offset initiative, you must mail a hardcopy signed and completed Offset Initiative Registration Application Form to the Director, Cap and Trade Branch, Ontario Climate Change Directorate, Ontario Ministry of the Environment and Climate Change (Ministry) at:

Ontario Cap and Trade Program
Ministry of the Environment and Climate Change
40 St. Clair Avenue West, 4th Floor
Toronto, ON M4V 1M2

Step 3: apply for offset credits

To apply to have your initiative recognized for Ontario compliance offset credits, your initiative must meet eligibility criteria under the Ontario Offset Credits regulation. In addition:

• Your Offset Initiative Registration Application Form must be reviewed and approved by the Ministry (see step 2 above)
• You must submit a signed and completed Application for Offset Credits Form to the Ministry, as well as supporting documentation such as:
  • an initiative report
  • a verification report that includes a positive verification statement
  • any other information required by the Ontario Offset Credits regulation and the applicable protocol

The Application for Offsets Credits Form and supporting documentation can be sent electronically to the Ministry of the Environment and Climate Change at complianceoffsets@ontario.ca

For more information on how to participate in Ontario’s compliance offset credits program, please contact the Ontario Cap and Trade Help Desk at CThelp@ontario.ca or call 1-888-217-3326.

Offset protocols

Offset protocols are specific to certain types of initiatives, and establish the criteria and processes that must be followed to be eligible to receive carbon offset credits.

Consultation on development of offset protocols

Ontario, in collaboration with Quebec, awarded a contract to the Climate Action Reserve to adapt offset protocols (from existing regulated and voluntary offset markets) for use in the cap and trade program.

Ontario is working with the Climate Action Reserve (CAR) to develop protocols for use in creating offset credits for Ontario’s carbon market. As part of that work, CAR is coordinating significant stakeholder consultations including engagement with stakeholders from key economic sectors, offset market participants, academia and environmental non-governmental organizations on each protocol. You can find more detailed information regarding consultations on CAR’s website including information on how to get involved.

We are also taking into consideration comments of Ontario’s Environmental Commissioner in developing all protocols.

The first three protocols for landfill gas, MMC and ODS initiatives are part of the regulation.

We will continue work on 10 additional protocols throughout 2018 with a view to finalizing them well in advance of the first compliance deadline of November 1, 2021. Wherever feasible, the protocols will be applicable across Canada.

Ontario posted the first three offset protocols to the environmental and regulatory registries for 30-45 day consultation periods. Ontario will post all proposed compliance offset protocols to the environmental registry for public review.

Voluntary offsets

Ontario is developing an Ontario-based voluntary carbon offsets program for governments, businesses and organizations that want to voluntarily reduce their greenhouse gases.

The program will create a clear set of rules and requirements for anyone who wants to create projects that generate carbon offset credits for trading on the voluntary market.

The Ontario voluntary carbon offsets program will also support the government’s carbon-neutral commitment.

Ontario posted a discussion paper on key elements of a proposed voluntary carbon offsets program to the Environmental Registry for a 46-day consultation period ending January 15, 2018. Based on feedback received, a decision has been made to proceed with the development of the Ontario voluntary carbon offsets program. A program framework has been posted to the Environmental Registry that includes criteria for creating Ontario voluntary carbon offsets by developing measurable greenhouse gas reductions and generating environmental and community co-benefits that will occur as a result of a project’s implementation.

Ontario will continue to work with Indigenous organizations and communities, stakeholders and other partners in the development of the Ontario voluntary carbon offsets program.