Clean Fuel Regulations (SOR/2022-140)

Marginal note:Number of compliance credits — projects in foreign country

41 The number of provisional compliance credits that are created by the carrying out of a CO₂e-emission-reduction project recognized under subsection 39(1) or 40(3) is determined — in accordance with the emission-reduction quantification method that is indicated in the agreement referred to in paragraph 39(1)(b) and that is applicable to the project — based on the proportion of the quantity of crude oil or liquid fossil fuel that is imported into Canada and that has a reduced carbon intensity as a result of the activities carried out for the project.

Marginal note:Extension of period — five years

• 42 (1) Subject to subsection (3), during the year that precedes the end of the period referred to in paragraph 31(2)(b) or 32(2)(d) or determined under subsection 37(5) or 40(5), as the case may be, a registered creator may apply to the Minister to extend that period for a single period of five years.

• Marginal note:Application — contents

  (2) The application for extension must be signed by the authorized agent of the registered creator and, if there are any changes in the information provided in the original application for recognition of the CO₂e-emission-reduction project, the application for extension must provide the updated information.

• Marginal note:No extension

  (3) In the case of a CO₂e-emission-reduction project that was recognized under subsection 35(1) or 39(1) as a project that may create compliance credits when carried out using a generic emission-reduction quantification method, no application for extension may be made if, during the year that precedes the end of the period established under paragraph 31(2)(b), the Minister establishes a specific emission-reduction quantification method under subsection 32(1) that is applicable to the project.

• Marginal note:Extension after change of method

  (4) If, during the five-year extension period granted by the Minister in respect of a CO₂e-emission-reduction project that was recognized under subsection 35(1) or 39(1) as a project that may create compliance credits when carried out using a generic emission-reduction quantification method, the Minister recognizes the project under subsection 37(3) or 40(3) as a project that may create compliance credits when carried out using a specific emission-reduction quantification method, the period during which the project may create provisional compliance credits begins on the later of the day on which the project is recognized under subsection 37(3) or 40(3) and the preferred day referred to in paragraph 37(2)(d) or 40(2)(d), as the case may be, and is determined by the formula

  P − D

  where

  P

  is the five-year extension period granted by the Minister, expressed as a number of days; and

  D

  is the number of days — during the period P — on which the carrying out of the project has created provisional compliance credits using the generic emission-reduction quantification method.

Marginal note:Federal or provincial laws

43 If an activity that is carried out as part of a CO₂e-emission-reduction project ceases to be additional to what is required by the laws of Canada or of a province — other than any laws relating to greenhouse gas emission pricing mechanisms, the reduction of the carbon intensity of fuel or the use of low-carbon-intensity fuel — the number of provisional compliance credits that are created under subsections 35(3), 36(3) and 37(6) and section 41 by the carrying out of the project is reduced in proportion to the reduction of CO₂e emissions that results from that activity.

Marginal note:Failure to comply with record requirements

44 If a registered creator fails to comply with any of the requirements set out in sections 166 and 168 in relation to a CO₂e-emission-reduction project, any compliance credits that are created by carrying out the project during the period of non-conformity with those requirements are not valid and are considered to be excess compliance credits that may be suspended by the Minister under section 158 or cancelled by the Minister under section 160.

Displacement of Fossil Fuel Usage

Land-Use and Biodiversity Criteria for Low-Carbon-Intensity Fuels

Marginal note:Maximum quantity

• 45 (1) The maximum quantity of a low-carbon-intensity fuel that is produced at a facility by a producer in Canada or foreign supplier during each period referred to in subsection (3) for which compliance credits may be created by the carrying out of a CO₂e-emission-reduction project described in paragraph 30(d) or be created under any of sections 94 to 96, 99, 100 and 104 is determined by the formula

  Q_fuel x Q_eligible ÷ (Q_eligible + Q_ineligible)

  where

  Q_fuel

  is the quantity of the low-carbon-intensity fuel that is produced at the facility during the period, expressed in kilograms or cubic metres, as applicable;

  Q_eligible

  is the quantity of eligible feedstock that meets the requirements set out in section 47 that was used at the facility by the producer in Canada or foreign supplier to produce the low-carbon-intensity fuel during the period, expressed in kilograms or cubic metres, as applicable; and

  Q_ineligible

  is the quantity of feedstock, other than eligible feedstock, that was used at the facility by the producer in Canada or foreign supplier to produce the low-carbon-intensity fuel during the period, expressed in kilograms or cubic metres, as applicable.

• Marginal note:Carbon intensity

  (2) For the purposes of subsection (1), a low-carbon-intensity fuel is a fuel that

  • (a) has a carbon intensity to which an alphanumeric identifier has been assigned under subsection 85(2); or

  • (b) has the default carbon intensity referred to in paragraph 75(1)(a) or determined in accordance with the emission-reduction quantification method that is applicable to a project described in paragraph 30(d).

• Marginal note:Periods

  (3) The periods for producing low-carbon-intensity fuels are, for any compliance period that ends after January 1, 2024,

  • (a) the period beginning on the January 1 and ending on the March 31 of the compliance period;

  • (b) the period beginning on the April 1 and ending on the June 30 of the compliance period;

  • (c) the period beginning on the July 1 and ending on the September 30 of the compliance period; and

  • (d) the period beginning on the October 1 and ending on the December 31 of the compliance period.

• Marginal note:Exclusive use

  (4) A person who uses a quantity of low-carbon-intensity fuel produced from an eligible feedstock to create credits in a jurisdiction outside Canada or to comply with a requirement relating to greenhouse gas emissions that is set by a jurisdiction outside Canada must not use that quantity of low-carbon-intensity fuel to create compliance credits by the carrying out of a CO₂e-emission-reduction project referred to in paragraph 30(d) or under any of sections 94 to 96, 99, 100 and 104.

Marginal note:Eligibility requirements

• 46 (1) Subject to subsection (2) and sections 48 to 55, 57 and 58, the following feedstock is eligible:

  • (a) feedstock that is not derived from biomass;

  • (b) feedstock that is derived from

    • (i) forest biomass derived from fire prevention and protection activities or from clearing activities that are not related to harvesting, such as infrastructure installation, pest and disease control and road maintenance,

    • (ii) crop residues or damaged crops,

    • (iii) secondary forest residues that are by-products of industrial wood-processing operations,

    • (iv) used or inedible organics from a residential area, retail store, restaurant, caterer or food processing plant,

    • (v) used fat or used vegetable oil,

    • (vi) used animal litter,

    • (vii) animal materials, including manure,

    • (viii) industrial effluents,

    • (ix) municipal wastewater, or

    • (x) used construction or demolition materials; and

  • (c) feedstock that is derived from agricultural or forest biomass but is not derived from a material or source referred to in paragraph (b).

• Marginal note:Intentionally used feedstock

  (2) A feedstock that is derived from agricultural or forest biomass and that is intentionally altered in order to meet any of the conditions set out in paragraph (1)(b) is considered not to be an eligible feedstock for the purposes of that paragraph.

Marginal note:Quantity of eligible feedstock

• 47 (1) The quantity of an eligible feedstock of a particular type that, after December 31, 2023, is removed from the site where it was harvested, mixed, processed, divided or obtained must not be greater than the quantity determined by the formula

  Q_inventory + Q_incoming

  where

  Q_inventory

  is the quantity of eligible feedstock of that type that was at the site after the previous time that a quantity of eligible feedstock of that type was removed from the site, expressed in kilograms or cubic metres, as applicable; and

  Q_incoming

  is the quantity of eligible feedstock of that type that was harvested at or brought to the site since the previous time that a quantity of eligible feedstock of that type was removed from the site, expressed in kilograms or cubic metres, as applicable.

• Marginal note:Production of fuel

  (2) For each period referred to in subsection 45(3), the total of the quantity of eligible feedstock of a particular type that is used to produce a low-carbon-intensity fuel at a facility and the quantity of eligible feedstock of that type that is at the facility at the end of the period must not be greater than the quantity determined by the formula

  Q_inventory + Q_incoming

  where

  Q_inventory

  is the quantity of eligible feedstock of that type that was at the facility at the beginning of the period, expressed in kilograms or cubic metres, as applicable; and

  Q_incoming

  is the quantity of eligible feedstock of that type that was brought to the facility during the period, expressed in kilograms or cubic metres, as applicable.

Marginal note:Wildlife habitat

• 48 (1) It is not permitted to harvest feedstock referred to in paragraph 46(1)(c) from land located in an area that provides a habitat for any rare, vulnerable or threatened species.

• Marginal note:Exception

  (2) However, the Minister may, on application from a person who harvests a feedstock referred to in paragraph 46(1)(c) or who produces fuel from that feedstock, authorize the use of a feedstock obtained from rehabilitation or habitat-improvement activities carried out on land located in an area that provides a habitat referred to in subsection (1) if the Minister is satisfied that those activities do not adversely affect that habitat.

• Marginal note:Application

  (3) The application must

  • (a) describe the activities that the person who harvests the feedstock has carried out or intends to carry out in the area; and

  • (b) demonstrate that the activities will not adversely affect the habitat.

Marginal note:Damaging agents

49 A feedstock referred to in paragraph 46(1)(c) must be harvested and transported in accordance with measures that monitor, prevent and control the introduction, spread and establishment of damaging agents, such as pests, invasive species and disease.

Marginal note:Crops — indirect changes to land use

• 50 (1) A feedstock referred to in any of subparagraphs 46(1)(b)(ii) to (vi) or paragraph 46(1)(c) that is a crop, crop by-product or crop residue must be produced in a manner that does not create a high risk of an indirect change to land use that adversely affects the environment.

• Marginal note:European Commission Delegated Regulation

  (2) For the purposes of subsection (1), there is a high risk that the production of a feedstock will cause an indirect change to land use that adversely affects the environment if the value specified for that feedstock in the Annex to the Commission Delegated Regulation (EU) 2019/807 of 13 March 2019 is greater than

  • (a) 1% in the column entitled “Average annual expansion of production area since 2008 (%)”; and

  • (b) 10% in the column entitled “Share of expansion into land referred to in Article 29(4)(b) and (c) of Directive (EU) 2018/2001”.

Marginal note:Crops — excluded land

• 51 (1) It is not permitted to harvest feedstock referred to in paragraph 46(1)(c) that is a crop from land that

  • (a) has an area greater than 1 ha and was, at any time on or after July 1, 2020,

    • (i) a forest that contains trees that are or are capable of reaching a height of 5 m and provide or are capable of providing a canopy cover of more than 10%,

    • (ii) a wetland that is periodically saturated with water for a period that is long enough to promote biological activity that is adapted to a wet environment, or

    • (iii) a grassland that is dominated by herbaceous or shrub vegetation that has not been cultivated for 10 years or more; or

  • (b) was never cultivated before July 1, 2020 and was, at any time on or after that day, in a riparian zone.

• Marginal note:Definition of riparian zone

  (2) In subsection (1), riparian zone means land that is located within 30 m, measured on a slope distance following the topography of the land, of

  • (a) the high-water mark of a watercourse that is more than 3 m wide; or

  • (b) the shores of a lake or permanent wetland that has an area greater than 5 ha. 

Marginal note:Forest-based feedstock

52 The harvesting of any feedstock referred to in paragraph 46(1)(c) that is derived from forest biomass must be carried out in accordance with a forest management plan that meets the following requirements:

• (a) it must be possible for a verification body to evaluate it;

• (b) it must be implemented, monitored and kept up to date, based on monitoring results, to promote adaptive management, by the person who is responsible for harvesting the feedstock; and

• (c) it must specify the practices to be followed to ensure that

  • (i) the management of the land where the feedstock is harvested is carried out in a manner that promotes timely forest regeneration of that land to its pre-harvesting condition using species of trees that are ecologically suited to the site and drawn, if possible, from native species or local genotypes,

  • (ii) adverse effects are prevented on naturally regenerated stands containing multi-layered canopies with trees near their maximum longevity as well as standing and fallen dead trees and forest debris at varying stages of decomposition,

  • (iii) forest management and related activities in the areas where the feedstock is harvested are carried out in a manner that prevents or mitigates adverse effects on the quantity and quality of the soil, on the quantity and quality of surface and ground water resources and on biodiversity, and

  • (iv) forest management and related activities in the areas where the feedstock is harvested are carried out in a manner that maintains the connectivity of watercourses.

Marginal note:Exemption — approval by EPA

• 53 (1) The Minister may exempt a feedstock that is a crop from the application of section 51 if

  • (a) the country from which the feedstock originates is the United States or is a country that is covered by the aggregate compliance approach referred to in section 80.1457 of Subchapter C of Chapter I of Title 40 of the United States Code of Federal Regulations; and

  • (b) the Minister is satisfied that section 80.1457 of Subchapter C of Chapter I of Title 40 of the United States Code of Federal Regulations provides a sufficient level of environmental protection with respect to the land on which the feedstock is harvested.

• Marginal note:Effective date of exemption

  (2) The exemption takes effect, in the case of the United States, on the day on which this section comes into force or, in the case of any other country, on the later of

  • (a) the day on which the EPA decides that the country is covered by the aggregate compliance approach, and

  • (b) the day on which this section comes into force.

• Marginal note:Period of validity

  (3) The exemption ceases to be valid on the earlier of

  • (a) in the case of the United States, the day on which the EPA publishes a finding that the 2007 baseline amount of agricultural land in the United States has been exceeded or, in the case of any other country, the day on which the EPA withdraws its approval for that country to be covered by the aggregate compliance approach, and

  • (b) the day on which the Minister determines that, following the granting of the exemption, amendments have been made to section 80.1457 of Subchapter C of Chapter I of Title 40 of the United States Code of Federal Regulations and, taking into account those amendments, the Minister is no longer satisfied that there is a sufficient level of environmental protection with respect to the land on which the feedstock is harvested.