Ottawa explores international carbon credit trading for Canadian projects

OTTAWA — The federal government is exploring a new framework that would allow Canadian companies to participate in international carbon markets.

Environment and Climate Change Minister Julie Dabrusin announced the initiative Sept. 24, saying the government is examining how Canada could participate in the international transfer of carbon credits under the Paris Agreement.

The proposed framework would allow verified greenhouse gas reductions and removals to be transferred between participating countries, helping them meet their climate commitments while encouraging investment in projects that reduce emissions.

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"The trading of ITMOs under the Paris Agreement can unlock greater global climate action by making it easier to transfer emission reductions and removals between countries," Dabrusin said.

"This is about turning our natural advantages and homegrown climate innovation into investment, good jobs, and new export opportunities."

The framework would focus on internationally transferred mitigation outcomes, known as ITMOs, which are governed by Article 6 of the Paris Agreement.

Under the system, countries can cooperate by transferring verified emissions reductions or removals to help meet national climate targets.

For example, a qualifying project that removes carbon dioxide from the atmosphere could generate credits that may be transferred internationally, provided the project meets established environmental and accounting requirements.

The federal government says the system could help attract investment into Canadian carbon removal technologies, industrial emissions reduction projects and nature-based solutions.

It says international carbon markets could help Canadian businesses attract financing, expand technologies and develop new export opportunities.

The proposal could have implications for Saskatchewan, where agriculture, energy production and emerging carbon capture technologies are important parts of the economy.

Carbon capture and storage projects, along with certain agricultural and land management practices, are among the types of activities that can contribute to reducing or removing greenhouse gas emissions.

An international carbon trading framework could potentially create additional market opportunities for qualifying Saskatchewan projects and technologies.

However, the federal government has not identified specific Saskatchewan projects that would participate in the proposed system.

Eligibility requirements and the potential financial benefits for individual industries would depend on the framework ultimately developed.

The federal government says maintaining the environmental integrity of international carbon credits will be a central requirement of the proposed approach.

Under Article 6, credits must represent emissions reductions or removals that would not otherwise have occurred without the arrangement.

The framework must also prevent double counting, where both the country generating a credit and the country purchasing it claim the same emissions reduction toward their climate targets.

Participating countries are required to establish systems for tracking, verifying and accounting for transferred credits.

Ottawa says any future Canadian framework would need to ensure that emissions reductions and removals are real, additional, verified and permanent.

According to research cited by the federal government from Carbon Removal Canada, a significantly expanded carbon dioxide removal industry could contribute billions of dollars to Canada's gross domestic product by 2050.

The report also suggests the industry could create hundreds of thousands of jobs if it grows to meet future demand.

The proposal also complements more than $13 billion in international climate finance outlined in the federal government's Spring Economic Update.

The federal government has not announced a timeline for implementing an international carbon credit trading system.

Instead, it plans to engage with provincial and territorial governments, Indigenous organizations and other partners while examining how international carbon transfers could operate in Canada.

Officials say the work will focus on establishing the accounting, verification and regulatory processes required under the Paris Agreement.

Canada will also continue examining potential opportunities involving domestic and international offset credits.

For now, the initiative remains in the exploratory stage, with no final trading framework or participation requirements announced.

With files from WestCentralOnline