Alberta-Based Offset Credit System
www.environment.alberta.ca/1238.html
Overview
Additionality and Quantification Procedures
Overview
Type of Standard and Context
Alberta’s offset credit system is a compliance mechanism for entities regulated under the province’s mandatory GHG emission intensity-based regulatory system. As part of the 2002 Climate Change and Emissions Management Act (CCEMA) and the 2007 Specified Gas Emitters Regulationpassed by the Alberta legislature, large final emitters (any facility in the provice that emits more than 100,000 metric tons of CO2e of GHGs per year) are required to reduce their GHG intensity by 12% per year. The Regulation, which took effect on July 1, 2007, represents the first GHG emissions legislation in Canada.
Emissions intensity, under the Alberta CCEMA regulation, is defined as the quantity of GHGs released by a facility per unit of production. The CCEMA regulation has set different emissions intensity reduction targets for established and new emissions sources. For “established” emitters (facilities that started commercial operations on or before January 1, 2000), emissions must be reduced by 12% below their approved baseline emissions intensity (based on the average of the facilities’ emissions for the years 2003-2005). For “new” emitters, (facilities tht began commercial operation after January 1, 2000 and have completed less than 8 years of commercial operation) the regulation has established reductions at an incremental level of 2% per year beginning in the fourth year of operation (until the full 12% annual reduction level is achieved).
Regulated facilities that are not able to meet their reduction obligation through direct facility improvements can meet the emissions intensity reduction target through three compliance mechanisms:
• purchase or use of Emissions Performance Credits*;
• contributions to the Climate Change and Emissions Management Fund at a price of CND 15 per metric ton of CO2e; or
• purchase of Alberta-based offset credits.
* Regulated entities that are able to do better than their emission reduction target can generate Emission Performance Credits (EPC) which are serialized by Alberta Environment. These credits can be banked for use in future years or sold to other regulated facilities that have not met their emissions reduction obligation.
Standard Authority and Administrative Bodies
The Alberta provincial government has the overall program authority for the Alberta-based offset credit system. Third-party verifiers serve to verify baselines, annual compliance reports, and offset credits being registered on the Alberta Emissions Offset Registry. Third-party verifiers must be professional engineers or chartered accountants with appropriate experience. Third party verifiers must complete and submit a Statement of Qualification, which states that the review team has adequate areas of knowledge and expertise as part of the required verification documentation (Alberta Environment, 2007a).
Regional Scope
The regional scope of the Alberta offset system is the Canadian province of Alberta.
Recognition of Other Standards/ Linkage with Other Trading Systems
Alberta has emphasized that they working with other jurisdictions and the federal government to identify how Alberta’s offset system will will be linked to or incorporated into Canada’s GHG offset program (see Canada’s Offset System for Greenhouse Gases) or other programs as they come on line.
Market Size and Scope
Tradable Unit and Pricing Information
The tradable units in the Alberta offset system are referred to as ‘Alberta-based offset credits’ or Verified Emissions Reductions or Removals (VERRs) and are measured in units of metric tons of CO2e.
Participants/Buyers
Offset projects can be developed in unregulated sectors such as small industrial facilities emitting under 100,000 tonnes CO2e per year, and agricultural sectors. Market participants include project developers, aggregators, brokers, and end buyers. End buyers are the regulated facilities that intend to submit offset credits for compliance (as of June 2008, regulated facilities comprised close to 100 large emitters accounting for approximately 100 MmtCO2e per year, nearly one half of total provincial emissions).
Current Project Portfolio
For the first six-month compliance cycle (July to December 2007), there were 1.5 million verified Alberta-based offset credits created and 1 million of these credits had been retired for compliance by regulated facilities (Ruud et al., 2008 ). Approximately 2.75 million metric tons of offsets were retired for compliance in the 2008 round. As of March 2009, 36 projects were approved/created, including 15 no-till/reduced-tillage, 7 wind energy, 4 biomass energy, 2 enhanced oil recovery, 2 composting, 2 acid gas injection, 1 landfill, 1 energy efficiency, 1 wastewater project, and 1 hydropower project. These projects are estimated to generate over 25 million offset credits through the project lifetimes (Carbon Offset Solutions, 2009).
Offset Project Eligibility
Project Types
The Alberta offset system takes a top-down approach to approving eligible project types. Offset projects must meet the requirements for an offset project stated in section 7 of the Specified Gas Emitters Regulation. Projects must also be generated in accordance with a government approved protocol that articulates minimum requirements for specific offset reduction activities in the province. As of July 2008, Alberta Environment, the provincial environmental regulatory agency has 24 government approved offset project quantification protocols.
As of March 2009, quantification protocols are available for the following projects types: acid gas injection, anaerobic wastewater treatment, beef feeding, beef-feed days, beef lifecycle, biofuel, biogas, biomass, compost, energy efficiency, enhanced oil recovery, streamlined enhanced oil recovery, landfill bioreactor, landfill gas, modal freight, non-incineration of thermal waste, pork, road rehabilitation, run-of-the-river electricity systems, solar electricity systems, tillage, waste heat recovery, streamlined waste heat recovery and wind-powered electricity systems. (The latest approved protocols are available on the program website.)
Project Locations
All projects are required to be based in the Canadian province of Alberta.
Project Size
There are no general restrictions on project size. Specific project size requirements, if any, are included in project protocols.
Small reduction projects may be aggregated into larger volume bundles for cost efficiency of verification and transaction costs.
Start Date
Project-based emission reductions or removals under the Alberta offset system are required to have resulted from actions taken on or after January 1, 2002.
Crediting Period
All projects, except reduced/no till and afforestation projects, have an initial crediting period of eight years with the possibility of extension for an additional five years from the project start date. The crediting period is 20 years for sequestration resulting from tillage management projects. Afforestation projects will be eligible for three 20-year crediting periods for a total project crediting period of 60 years.
Co-benefit Objectives and Requirements
There are no specific co-benefit requirements for project eligibility. Other environmental benefits may be considered when determining the eligibility of an offset project (Alberta Environment, 2008).
Additionality and Quantification Procedures
Additionality Requirements
Additionality requirements under the Alberta offset system are defined in generic terms. Projects are required to be real, demonstrable and quantifiable, and to not be required by law (Alberta Environment, 2007). Issues concerning additionality are addressed during the multi-stakeholder technical review process and during the public posting period. Project developers must demonstrate that the project meets start date and regulatory surplus requirements. No additional additionality screening tests are required.
Quantification Protocols
A bottom-up approach is used to develop baseline quantification protocols under the Alberta offset system. Offset project developers propose baseline quantification methodologies that are then reviewed and approved by Alberta Environment. Monitoring requirements are not specified in the quantification protocols.
In order to address the issue of permanence in conservation projects, the Alberta offset system has developed an ‘assurance factor approach’ based on consultations with the industry, Canadian government agencies and experts. Assurance factors are used to discount the offset credits generated from carbon sequestration projects in any one year to the volume of offset credits that would be considered permanently sequestered. Once discounted, the liability is transferred from the project proponent to the Government of Alberta and the offsets achieved are valued as permanent. The Government of Alberta intends to continue to monitor the effectiveness of assurance factors in managing risk and maintaining environmental integrity.
Project Approval Process
Validation and Registration
Validation is optional under the Alberta offset system. The Alberta government’s position is that validation is considered a business risk management tool. Validation, where under taken, is contracted by the project developer in the private sector to perform this task (Alberta Environment, 2007).
All offset credits must be registered on the Alberta Emissions Offset Registry to be considered for compliance under the Specified Gas Emitters Regulation.
Monitoring, Verification and Certification
Verification and monitoring of the offsets used to achieve compliance are required under the Alberta Offset System.
Offset project developers are required to prepare a monitoring plan, which includes details of the monitoring equipment to be used, the locations of the sampling points, the frequency of the sampling events and the data collection methodology. The plan must be presented to the third party verifier as part of the verification process, and may be requested by Alberta Environment during its offset credit review.
A verification report must be submitted to the Alberta Emissions Offset Registry with the request for serialization of Offset Credits. The verification report must also be submitted to Alberta Environment by all regulated entities using offset credits to achieve compliance as part of the facility’s compliance submission.. All verification reports must have the endorsement of a third-party verifier who is either a professional engineer or a chartered accountant with a background in both auditing and gas emissions. The regulator tracks all verified emission offsets from projects that are used for compliance and may randomly audit offset credits submitted for compliance to ensure the credits meet government requirements.
Registries and Fees
Each offset project developer is required to develop an Offset Project Plan, which includes a description of the project and the baseline used, and a monitoring and quantification plan. This information is included in the Alberta Emissions Offset Registry, a registry supported by the GHG Clean Projects Registry for Alberta’s emission offset project participants only. The purpose of the registry is not to provide assurance of the validity of credits or to serve as an offset credit trading platform, but only to serve as a means of recording project and credit information, including assigning serial numbers, which are used to track offset credits.
The registry fee for activating a project account and filing a completed application is USD 193 (CAD 200). A fee of USD 241 (CAD 250) is charged for displaying preliminary project information, the GHG Project Report, GHG Project Plan, Verification Report, Statement of Verification, GHG Assertion, and where applicable, the Validation Report. To allocate a serial number to and display VERRs from a project there is a fee of USD 0.05 (CAD$0.05) per VERR. No additional fees are charged to delist or retire VERRs (Canadian Standards Association, n.d.).
Selected Issues
Following the completion of the second compliance period in March 2009, Alberta Environment held a meeting to review the offset system and produced a presentation outlining issues in the 1st and 2nd year compliance cycle of the Alberta Offset System. The analysis of the Alberta offset system market function identified the following key issues in the use of offsets for regulatory compliance:
• Differing opinions on what documentation needed to be disclose to a verifier or auditor and different capacities to deal with managing project documentation;
• Verification results were not always replicable;
• Verifiers signed off on projects that had not used appropriate protocol methodologies;
• Delayed registration process to give serial numbers to credits due to lack of identified buyer and having all of the requests come during the last month of the compliance period;
• Errors in allocating serial ranges, including up to 2,500 overlapping credits between facilities (Alberta Environment, 2009).
The recommendations for Alberta Environment to improve the Alberta offset system included:
• Further refinement of required project documentation;
• Further clarification of verification guidelines;
• The registry no longer guarantees it will provide serial numbers for requests submitted during the last month of the compliance period (March);
• Improvements to registry system to better accommodate market permutations (Alberta Environment, 2009).
Additionality concerns have been raised about the January 1, 2002 start date for determining the eligibility of offset projects. Critics argue that it is 10 months before the release of Alberta’s first climate change plan (in October 2002) and that commercial projects which became operational in 2002 and 2003 were highly likely to have already been in the planning and construction phases before the plan was published (Whitmore and Shariff, 2007).
References
Alberta Environment (2009). Alberta and climate Change: Meeting the Challenge -- Assurance & Issues. Offsets Workshop, 22 June 2009.
Alberta Environment (2008). Offset Credit Project Guidance Document: Specified Gas Emitters Regulation. February 2008.
Alberta Environment (2007). Offset Credit Project Guidance Document: Specified Gas Emitters Regulation. September 2007.
Alberta Environment. (2007a). Offset Credit Verification Guidance Document. September 2007.
Canadian Standards Association. (n.d.). GHG CleanProjects Registry: Schedule B GHG CleanProjects Registry Services Agreement.
Carbon Offset Solutions. (2008). Search Projects.
Ruud, L. et al (2008). Alberta Offset System: First Year Retrospective. July 2008.
Whitmore, J. and Shariff, N. (2007). Comments on Alberta’s Offset System Project Guidance Document [draft], June 20, 2007. The Pembina Institute and Toxics Watch Society of Alberta.