BP Canada Energy Group ULC (…

BP Canada Energy Group ULC (“BP Canada”) appreciates the opportunity to provide comments on the proposed Ontario Offset Credits regulation (EBR 013-1460), after having previously provided feedback on the Ontario Compliance Offset Credits regulatory proposal in December 2016. We are pleased to see that Ontario will expand the offset project sponsor residency requirement to Canada, rather than solely Ontario, which is consistent with the Market Participant Requirements in the Cap and Trade Program Regulation (O.Reg. 144/16).

As a mandatory participant in the Ontario cap and trade program, BP Canada supports Ontario’s commitment to developing a robust offset regulation to enhance the operation and cost-effectiveness of the program. BP globally has been actively involved in the offset project sphere for over 10 years, investing in programs such as the United Nations Clean Development Mechanism and California Cap and Trade Program to support its compliance obligations around the world. Offsets have proven to play a vital role in cap and trade programs to date, offering covered entities vital flexibility in complying with program requirements, thereby lowering the total cost of emission reductions to consumers and industry, while maintaining the environmental integrity of the program.

BP Canada welcomes the similarities between Ontario’s proposed regulation and those in place in the other Western Climate Initiative jurisdictions, comprising Quebec and California. The acceptance of offsets from the California cap and trade program in Ontario enables covered entities to manage trans-national greenhouse gas exposures effectively and obtain the lowest cost of compliance through participation in efficient joint auctions, while greenhouse gas reductions are achieved on a continental basis. BP is pleased to see Ontario’s leadership in retaining its 8% offset usage limit in the proposed regulation, and urges the Province to maintain this level for all the reasons above.

Drawing on BP’s global experience in the offset markets, we have focused our comments on Parts IV (Reversals) and V (Reporting and Verification) of the proposed regulation that we deem in need of further clarification and/or adjustment. Our aim here is to help Ontario develop regulation which provides a strong framework for the efficient and effective roll-out of offset projects, whilst also ensuring the associated greenhouse gas reductions remain real, quantifiable, enforceable, verifiable, additional and permanent.

We see much benefit in the proposed regulation applying the ISO greenhouse gas verification standards. The approach of having project verification reports apply a 5% materiality threshold is welcomed and vitally necessary to enable verifiers to provide verification services and statements that meet a high, but not absolute level of assurance. This means that minor errors, omissions or misstatements may not be detected during verification, which is necessary for greenhouse gas programs to function efficiently. To achieve absolute assurance or apply materiality at a very stringent level, i.e. well below 1%, means that verifications could take months longer as, for example, verifiers review every data-point rather than samples only. However, the proposed regulation appears to apply reversals without a materiality threshold, i.e. down to the last tonne. As such, there could be many cases where errors, omissions or misstatements are found post issuance that may trigger extensive reversal processes involving further verification work and reporting. It would be more efficient to apply a common materiality threshold in conjunction with a reasonable level of assurance consistently across both verification and reversals. The regulation proposes 5% for regular verifications and a threshold of 1 tonne for reversal verifications, which could correspond to a reversal materiality threshold of 0.001% for a large project. This is likely to drive a very high rate of reversals, in terms of cases and not necessarily volumes, and thus undermine the integrity of the process.

In conclusion, BP Canada wishes to thank the Ontario Ministry of the Environment and Climate Change for your consideration of this matter.

[Original Comment ID: 211344]