UPDATE 2-Canada unveils greenhouse gas reduction credits to boost carbon trading market

(Adds details of offset system)

By Nia Williams

CALGARY, Alberta, March 5 (Reuters) - Canada released draft regulations aimed at stimulating domestic carbon credit trading on Friday, part of the federal government's push to curb emissions of climate-warming greenhouse gases.

Canada, which is the world's fourth-largest oil producer and one of the highest greenhouse gas (GHG) emitters on a per capita basis, has committed to reducing its emissions to 30% lower than 2005 levels by 2030, and is targeting net-zero emissions by 2050.

The new Federal GHG Offset System is designed to support a domestic carbon trading market. Projects that reduce or remove GHGs can generate credits and sell them to industrial facilities - such as cement works or refineries - that exceed their emissions limits, which are determined under Canada's carbon tax.

Environment Minister Jonathan Wilkinson said the system will create opportunities for farmers, foresters and indigenous communities, among others, to earn revenues from projects that cut GHG emissions.

Ottawa also hopes it will spur innovation and private-sector investment in emissions-reducing technology, and allow Canadian industry to remain competitive by lowering the cost of carbon credits.

"This system will encourage cost-effective emissions reductions right here in Canada and create new economic opportunities, particularly in the forestry, agriculture, and waste sectors," Wilkinson said in a statement.

Projects must achieve permanent GHG reductions that go beyond what is legally required. Ottawa is still working on rules for project eligibility and is developing protocols for advanced refrigeration systems, landfill methane management, forest management and sustainable agricultural land management first.

Next up will be protocols for projects including aerobic composting and livestock feed management, the government said.

Final regulations are expected in fall 2021.

Each credit will be equivalent to one tonne of carbon dioxide equivalent removed or reduced. The price will be set in the open market, with the federal carbon tax expected to act as a price ceiling.

Last year, Prime Minister Justin Trudeau's Liberal government said it will ramp up its price on carbon to C$170 ($134.32) a ton by 2030. ($1 = 1.2656 Canadian dollars) (Reporting by Nia Williams Editing by Leslie Adler and Aurora Ellis)

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