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Carbon Offset Systems in Canada and the Potential Implications for Canadian Timberland Operators

This commentary, in addition to discussing the development of the federal greenhouse gas (GHG) offset credit system in Canada, examines the implications for timberland operators from an environmental, social, and governance perspective, specifically the environmental subfactor, carbon and GHG costs.

Summary highlights include the following:

-- While the carbon taxes aim to create incentives for emitters to reduce their GHG intensity and improve further upon it, the offset credit system aims to create economic incentives for additional voluntary projects that could result in additional GHG reductions or removing GHG emissions from the atmosphere through carbon sinks.
-- The activities carried out by timberland operators that qualify for offset credit may include sustainable forest management practices, such as increasing rotation ages, thinning diseased trees, etc.
-- The carbon offset system offers opportunities for timberland operators to generate and monetize surplus credits from certain projects that reduce GHG emissions.

“Development of a federal carbon offset credit system in Canada could have modestly positive implications for Canadian timberland operators, but not likely of a magnitude to affect their current credit ratings,” said Guru Durairaj, Assistant Vice President, Natural Resources & Pipelines.