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Tips For Selling Carbon Credits

You can earn saleable carbon offset credits by reducing the amount of greenhouse gases produced on the farm or by sequestering greenhouse gases already in the atmosphere. It is important farmers understand the difference in these two ways to create carbon credits.

One offset carbon credit represents the removal of one tonne of greenhouse gases from the atmosphere OR the reduction of one tonne of greenhouse gas emissions. Under a regulated offset system, large emitters of greenhouse gases — such as energy companies — must reduce emissions by a legislated amount. In many cases, these companies cannot reduce their emissions enough to meet the limits so they must purchase emission offset credits. Basically, they pay others — such as farmers — to reduce carbon on their behalf. Farms, through certain practices, can generate carbon offset credits that they can sell to these large emitters.

Farmers can also sell credits under the voluntary carbon system. Companies and individuals can and do purchase carbon offset credits voluntarily, believing a reduction of greenhouse gases in the atmosphere will mitigate climate change. These individuals and companies feel that by purchasing carbon offset credits voluntarily they are doing their part to help the environment.

HOW CAN YOU GENERATE CREDITS?

Agriculture is exempt from emission controls therefore real, quantified, and verified reductions of greenhouse gas emissions that farmers achieve are 100 per cent saleable. Farmers can do a number of things to create saleable credits. Cattlemen can increase levels of edible oils in rations, which result in a reduction of methane production in the rumen. Cattlemen following this feeding regime can earn a specific number of carbon credits for the reduction in the gases their cattle pass. Swine producers can also sell carbon credits achieved through improved ration formulation. Improved manure storage systems and utilizing an anaerobic decomposition system for manure and agricultural waste can earn carbon credits. So can reductions in fertilizer usage and improving fertilizer application methods.

You can also generate credits by sequestering — or trapping — carbon in your fields. The Alberta government has pledged $2 billion for a pipeline and deep well system intended to capture carbon dioxide produced by the energy sector and transport this CO2 by pipeline to wells where it can be stored deep underground to prevent it from entering the atmosphere.

PLANT TREES

Probably the best example of a way farmers can sequester greenhouse gases is through afforestation. Since trees remove greenhouse gases from the atmosphere, planting trees is one of the most lucrative ways farmers can earn carbon credits. But while trees may generate more carbon credits, carbon credit alone is not enough to justify the cost and lost income from converted cropland to forest. Limited markets for these trees and no cash flow from a woodlot for years precludes most farmers from including woodlots in their cropping plans. What we need is a protocol that extends carbon credits to field shelterbelts plantings.

ZER OTILLAGE HELPS ON TWO FRONTS

Some management practices actually reduce carbon production and sequester greenhouse gases. Zero tillage is a good example. Fewer passes means less fuel burned. Fertilizer losses are lower with zero tillage. And leaving the soil in tact means carbon trapped in the soil cannot escape.

But make sure you understand what you’re committing yourself to by selling credits for zero tillage.

Carbon credits earned through reductions are relatively easy to determine. Measurements can be taken as to the size of the reduction and this number of carbon credits can then be sold. Reductions can only happen once and sales of reductions typically happen only after the reduction has been made. Therefore, both sellers and buyers of carbon credits can be fairly confident in the quality and validity of such credits.

On the other hand, sequestration of carbon is much more complex. For one thing, it is difficult to determine how much carbon dioxide is being stored in a particular soil under specific environmental conditions.

But the most troubling question is if a farmer sells carbon credits based on the sequestration of carbon in the soil, for how many years is the farmer responsible for storing that carbon? Since tillage releases sequestered carbon dioxide from the soil, how many years will a farmer be restricted from tillage? This leads to another question: Who is responsible for the release of carbon if a farmer sells the untilled land for which he has sold carbon credits and the new owner tills the ground?

Currently some aggregators selling carbon credits based on the tillage management protocol are only selling the amount of credits that have been created by the reduction component of the tillage protocol. While these farmers do not earn as many carbon credits per acre as farmers who are also promising sequestration of carbon, they have no future liability if the soil is tilled.

Other aggregators are telling farmers their commitment extends only for the life of the contract and once the contract expires farmers are free to do what they want with the land.

Jennifer Cleall, a lawyer with Davis LLP, a national climate change law practice group, is more cautious. She points to Canada’s proposed Offset System for Greenhouse Gases, which was announced June 10, 2009 and is a step in the finalization in the creation of a national framework for regulating greenhouse gas emissions and the creation of a Canadian carbon market.

Cleall says the draft proposal clearly states “offset credits issued for biological sink projects have a 25-year liability period. That is, the carbon must be stored for at least 25 years following the end of the final reporting period in the final registration period.

If a reversal does occur, the proponent will be required to replace all previously issued credits with an equivalent number of credits from its account in the tracking system that have been accepted for compliance by the regulations,” added Cleall.

We don’t know if or when this latest draft for a regulated national carbon offset system will come into effect. Nor is there any way of knowing how the harmonization of a national system will work with provincial systems such as Alberta’s, which is already in place, or with the voluntary systems such as that offered through the Chicago Climate Exchange. The rules for offset carbon credits systems and even the protocols are constantly changing. Therefore, it is critical farmers read the fine print closely before signing any carbon credit sales agreement. Fully understand, and make sure it is stated on a carbon credit contract if the sale is for reduction of greenhouse gas emissions or for sequestration of carbon in the soil or another type of sink. Make sure the contract clearly states the liability period for which farmers must store any sequestered carbon. Finally, even if the contract says all liability ends at the end of the contract period, be aware there is a risk that the implementation of a regulated Canadian carbon market could override an existing carbon contract and your liability period for release of sequestered greenhouse gases could extend as much as 25 years after your contract ends.

FARMER EXPERIENCES

Future articles will focus on specific farmers and what they’ve done to generate credits and the prices they received for selling the credits. Do you have an experience that you’d like to share? Please contact me at [email protected]or 780-672-4394.

Gerald Pilger farms near Ohaton, Alta. Email

him at [email protected]

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