Carbon Credit Registration and Trading on British Columbia's Registry - Tanzania National Carbon Monitoring Centre (NCMC) | Carbon Tanzania

What are compliance carbon credits?
Carbon credits are traded on two kinds of markets: compliance markets and voluntary markets. Compliance markets are mandated and regulated through legislation and allow entities to purchase carbon credits with the goal of complying with their emissions reduction obligations. Voluntary markets function outside of a compliance regime and enable companies to voluntarily reduce emissions without an intended compliance purpose.

In British Columbia (BC), compliance carbon credit trading and use is governed by the Greenhouse Gas Industrial Reporting and Control Act (GGIRCA). Under GGIRCA, three regulations have been created:

The Greenhouse Gas Emission Reporting Regulation, BC Reg 249/2015 (GGERR);¹
The Greenhouse Gas Emission Control Regulation, BC Reg 250/2015 (GGECR);² and
The Greenhouse Gas Emission Administrative Penalties and Appeals Regulation, BC Reg 248/2015 (GGEAPAR).³

Taken together, the GGIRCA legislative regime currently creates an output-based pricing system (OBPS) for liquefied natural gas projects and facilities that produce 10,000 tonnes or more of carbon dioxide equivalent during a reporting period.⁴ This is achieved while ensuring compliance with the emissions obligations affirmed in the Greenhouse Gas Pollution Pricing Act, SC 2018, c 12 (GGPPA).⁵ The GGPPA is a federally passed piece of legislation that sets a minimum standard for carbon pricing in Canada – all provincial carbon emission legislation must comply with the GGPPA emissions benchmarks to be valid and enforceable.

Types of compliance carbon credits available under GGIRCA
Currently, three types of compliance carbon credits are available under GGIRCA: Offset Units (Offsets), Earned Credits (Credits) and Funded Units (Units):

Offsets are generated by facilities that verifiably remove or reduce one-tonne carbon dioxide equivalent from the atmosphere. These reductions or removals must result from an accepted emission offset project and are issued with the approval of a GGIRCA Director (Director);⁶
Credits can be created by GGIRCA regulated facilities that verifiably reduce their emissions by one-tonne carbon dioxide equivalent below their emissions benchmark during a compliance period; and
Units are purchasable compliance credits sold by the Government of British Columbia. Units are not exchangeable credits that can be listed and traded with other regulated entities, but rather, their purpose is solely to be retired as an emissions compliance reduction for the purchaser. The price is currently CA$65 per unit and will continue to increase in line with the federal benchmark set out in the GGPPA.⁷ Currently, under the GGPPA the carbon price will increase at a rate of CA$15 per year, with an end price of CA$170 per tonne by 2030.

Registration process
Entities wishing to list or trade Offsets and Credits will first need to register for a BC Carbon Registry (Registry) account. Both Credits and Offsets are listed and purchased via the same Registry; however, the registration, validation and issuing process differs on whether the entity is wishing to sell Offsets or Credits. Units, although not tradeable or listable, can also be purchased from the government via the Registry by regulated entities.

i. Registration of Offsets
Currently, there are three main steps in order to register and publicly list Offsets on the Registry. First, the entity wishing to list the Offsets (Project Proponent) must register for a BC Carbon Registry account.⁸ In doing so, the Project Proponent must choose the classification of the account, in this case a “Project Proponent,” and enter an array of business and personal information on the online form. Next, the Project Proponent must read and accept the BC Carbon Registry Terms & Conditions.⁹ Once the application is submitted, it will be reviewed by the Registry Administrator. The Project Proponent will be notified of approval via email and will receive login details and assistance using the Registry at that point.¹⁰

Once registered and approved by the Registry, the Project Proponent can move on to the second step of the process: applying for the Offset generating project to be approved by the Registry. To do so, a Project Proponent must first submit a Project Plan Template to an approved third-party verification body (a Verifier).¹¹ From here, the Verifier must validate the project by filling out the Validation Statement Template.¹² Thereafter, the Verifier will submit both the Project Plan Template and the Validation Statement Template to the Registry for review, as well as fill out and submit a Conflict of Interest Report.

The final step requires that the Registry Director review the forms submitted by the Verifier and approve the Offset generating project. Once this has been completed, the Director will serialize and credit the Offsets to the Project Proponents holding account. At this point, all the previously submitted documents will be publicly posted on the Registry, along with the number of Offset credits issued to the Project Proponents Holding Account. From here, the Project Proponent can sell, bank, intra-company transfer or inter-company transfer their Offsets to be used by Regulated Operations as a means of complying with their emission reduction obligations.

ii. Registration of Credits
Credits can only be generated by entities that have their emissions regulated under the GGIRCA legislative scheme. Just as with Offsets, there are three steps for registering and generating Credits. First, the entity wishing to generate the Credit must register for a BC Carbon Registry account. This can be done by creating a new account on the Registry portal, filling out the required information, and choosing the classification as “Regulated Operation – Compliance.”¹³ Next, the Regulated Operation must read and accept the Registry Terms & Conditions and submit their application. Once submitted, the application will be reviewed and approved by a Registry Director. From here, the Regulated Operation will be notified via email once their registration has been approved, as well as receive login and Registry assistance details.¹⁴

Second, the Regulated Operation must submit a Reporting Operation Registration Form.¹⁵ This involves entering an array of facility and emissions information and submitting a completed form to the British Columbia Greenhouse Gas Regulator – the contact information for the Regulator is included on the form.

Third, once a Regulated Operation has an approved Registry account and has properly submitted a Reporting Operation Registration Form, they can begin the final step of generating a Credit: submitting a Compliance Verification Statement & Conflict of Interest Report.¹⁶ This involves the Regulated Operation filling out the associated forms and having a Verifier confirm the emissions of the Regulated Operation. Next, the Verifier must submit the forms to the Registry and fill out a Conflict of Interest form.¹⁷ Once the aforementioned is properly submitted, the Director of the Registry will confirm that the emissions of the Regulated Operation are below the emissions benchmarks for the reporting period and issue the Credits to the holding account of the operator of the Regulated Operation. From here, the operator of the Regulated Operation can choose to bank, trade or transfer the Credits to another facility.

Finding someone to buy or sell carbon credits
While Offsets and Credits are registered/transferred on the Registry, the actual purchase and sale of compliance carbon credits are primarily transacted in the over-the-counter (OTC) market. An OTC contract is not traded on an asset exchange and can be negotiated (even to price) between two counterparties.

Market participants will enter into OTC contracts for the purchase and sale of the Offsets and Credits. These OTC contracts will contain “confirmation” type details (price, quantity, vintage, delivery date, etc.), and such other negotiated terms and conditions as the counterparties may mutually agree. Once the counterparties have negotiated a deal to buy or sell Offsets and/or Credits, they will change ownership on the Registry.

Types of accounts in the BC Carbon Registry and how to use them
Once an Offset or Credit has been issued into an entity’s holding account by a Registry Director it can be sold, retired towards an entity’s emission reduction obligations, banked, or intra/inter-company transferred. This can be done via the BC Carbon Registry portal; however, an understanding of the different types of Registry accounts and their associated uses is key to an entity being able to smoothly navigate the BC compliance carbon credit framework. There are three types of accounts entities have on the Registry:

Holding accounts serve as a middle ground where compliance credits can be transferred in and out while ensuring that the credits are not used until the entity decides to.¹⁸ All Offset and Credit transfers will occur by moving credits from the transferor’s holding account to the transferee’s holding account, compliance account, or another approved registry. These transfers are completed on the Registry portal and require electronic consent from both the transferor and the transferee.
Compliance accounts are used when a Regulated Operation wishes to apply its Offsets, Credits, or Units toward its emissions reduction obligations.¹⁹ To do so, a Regulated Operation will need to transfer the credits they are wishing to use into their compliance account prior to the final date of their emissions reporting period. From here, the Registry Director will retire as many of the compliance credits towards the Regulated Operation’s emission obligations as it can and return any excess credits to the Regulated Operation’s holding account.
Retirement accounts are where the Registry Director moves compliance credits that have been retired toward a Regulated Operation’s emissions reduction obligations. Once a compliance credit is moved into a Regulated Operation’s retirement account by the Director, it cannot be transferred back to the compliance or holding account. This ensures the permanency of the emissions reduction used against a Regulated Operation during a reporting period.

If you have any questions about this topic, please reach out to the authors, Courtney Burton and Stewart Maier.

Special thanks to summer law student, George King, who assisted in preparing this insight.