July 23, 2009 (Toronto, ON) - Bennett Jones LLP welcomes the announcement today by the Voluntary Carbon Standard Association (VCSA) outlining changes in the rules with respect to the creation of Voluntary Carbon Units (VCUs) in countries named in Annex B to the Kyoto Protocol ("Annex B Countries") based on criteria defined by the VCSA Board. Under the new rules, Canadian-based projects can now freely apply to use the VCS and issue VCUs without arranging for the Government of Canada to cancel an equal number of Kyoto Protocol units (called Assigned Amount Units or AAUs).
The change will provide new incentives for greenhouse gas (GHG) mitigation actions, thereby benefitting the environment by supporting voluntary efforts to create GHG emission reductions and sequestrations in Annex B Countries under certain criteria, with Canada being the first approved case. The Voluntary Carbon Standard is a leading standard in the burgeoning market for GHG voluntary offsets.
On behalf of some of its clients, Bennett Jones made submissions to the VCSA requesting a change to Section 5.2.2 of the VCSA rules which, as then drafted, required any projects hosted by an Annex B country that wanted to be able to use the VCS standard to issue VCUs to ask the national government of that country to give up an equivalent entitlement to Kyoto Protocol units (AAUs).
As Canada had ratified the Kyoto Protocol, project developers in Canada could not use the VCS, despite the Canadian government making it clear that it did not intend to meet the GHG emission limitations imposed by the Kyoto Protocol. This created a situation where VCUs could be created in the United States, but not across the border in Canada, under essentially identical circumstances, depriving Canadian offset developers of the ability to access the portion of the global GHG market where VCUs are a well recognized and widely accepted commodity.
The VCSA responded to the submissions made by Bennett Jones and has specified criteria which it will apply to determine when Section 5.2.2 will not apply and, as a result, when the VCSA will not require AAUs to be retired by the national government of the Annex B country hosting the project. In addition, the VCSA accepted Bennett Jones' submission that Canada should be excepted from the previous application of Section 5.2.2 of the VCSA rules and has announced that Canada is the first (and so far only) Annex B jurisdiction in which GHG emission reductions or sequestrations that otherwise meet the VCS standard can be freely issued without government cooperation.
The Bennett Jones Climate Change and Emissions Trading Group's efforts were lead by Andrei Marcu, its Senior Climate Change Business Advisor, with the support of Gray Taylor, the Chair of the Climate Change and Emissions Trading Group. Andrei Marcu's role built upon his long experience in emissions trading and related matters for both voluntary and compliance matters. Andrei Marcu stated, "This ruling will allow Canadian project developers the opportunity to tap the global carbon finance market and also integrate Canada in the international carbon market, which is critical given the important role Canada has in global energy markets."
Gray Taylor stated, "The addition of Andrei Marcu's vast international experience and capability to our world-class climate change practice improved our ability to tackle extraordinarily difficult assignments like this one in a sophisticated and creative way. We believe the changes made by the VCSA will benefit our clients both in and out of Canada as well as Canadians generally and, most importantly, the atmosphere."
Says Hugh MacKinnon, Chairman and CEO of Bennett Jones, "Our cutting edge climate change practice has achieved another first. All of us in the firm are pleased with this major achievement for our clients and our Climate Change and Emissions Trading practice group."
On behalf of one of Bennett Jones' clients, Emission Credits Corporation, Robert Coulter, the Chief Executive Officer and former Aboriginal leader, stated, "This is a truly remarkable achievement which validates our efforts to produce voluntary reductions in Canada for use outside of compliance systems. We are truly appreciative of Bennett Jones' efforts and accomplishment. We look forward to creating many VCUs in the near future."
Dave LaBarre, Executive Vice President, Blue Source LLC, another Bennett Jones client, added, "Blue Source was pleased to engage with Bennett Jones who drove this initiative which will allow our clients to create VCUs from Canadian emission reduction projects. We are encouraged to now offer multiple outlets for voluntary offsets which will bring increased value to our customer base."
About Bennett Jones LLP:
With over 350 lawyers in four offices, Bennett Jones is a premier Canadian business law firm providing integrated legal and strategic business services across all areas of business law. The firm's practice spans the issues relevant to business, including the provision of climate change policy advice and the planning and implementation of emissions trading transactions where the firm is recognized as a leader both in Canada and around the world. Bennett Jones deals with matters both in and out of Canada building on core legal and advisory expertise in the areas of energy and natural resources projects and transactions, mergers and acquisitions, corporate finance and banking, corporate governance, bankruptcy and restructuring, competition, climate change and environmental, regulatory issues, major capital projects, international trade and investment, technology, tax, litigation and intellectual property.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.