By Nia Williams (NYSE:WMB)
CALGARY, Alberta (Reuters) - Canada released draft regulations on Friday aimed at stimulating domestic carbon credit trading, part of the federal government's push to curb emissions of climate-warming greenhouse gases.
Canada, the world's fourth-largest oil producer and one of the highest greenhouse gas (GHG) emitters on a per capita basis, has committed to reducing emissions by 2030 to 30% lower than 2005 levels. It is targeting net-zero emissions by 2050.
The new Federal GHG Offset System is designed to support a domestic carbon trading market. Projects that reduce or remove GHGs can generate credits and sell them to industrial facilities - such as cement works or refineries - that exceed emissions limits determined under Canada's carbon tax.
Environment Minister Jonathan Wilkinson said the system will create opportunities for farmers, foresters and indigenous communities, among others, to earn revenues from projects that cut GHG emissions.
Ottawa also hopes it will spur innovation and private-sector investment in emissions-reducing technology, and allow Canadian industry to remain competitive by lowering the cost of carbon credits.
"This system will encourage cost-effective emissions reductions right here in Canada and create new economic opportunities, particularly in the forestry, agriculture, and waste sectors," Wilkinson said in a statement.
Environmental group Greenpeace criticized the plan, saying Canada should focus on cutting emissions in all sectors of the economy.
"If we want to encourage climate action in agriculture or forestry, let's do that directly rather than turning the work of farmers and forest protectors into a get-out-of-jail-free card for oil and coal companies," said strategist Keith Stewart.
Projects must achieve permanent GHG reductions beyond what is legally required, and must have started operating no earlier than Jan. 1 2017. Ottawa is still working on rules for project eligibility and developing protocols for advanced refrigeration systems, landfill methane management, forest management and sustainable agricultural land management.
Next up will be protocols for projects including aerobic composting and livestock feed management, the government said.
Final regulations are expected in fall 2021.
Each credit will be equivalent to one tonne of carbon dioxide equivalent removed or reduced. The price will be set in the open market, with the federal carbon tax expected to act as a ceiling.
Last year, Prime Minister Justin Trudeau's Liberal government said it will ramp up its price on carbon to C$170 ($134.32) a ton by 2030.
($1 = 1.2656 Canadian dollars)