Business | Spring 2008
Carbon credits enhance no-till.
By John Dietz
Here's another advantage for no-till: you can now sell its environmental benefits — for cash. But look before you leap.
Carbon credit is the latest buzzword on the prairies, especially for no-till farms. This reward for reducing greenhouse gases (GHGs) is a cash payment available to farmers practicing environmentally friendly land management that ties up carbon in the soil instead of allowing it to escape into the air.
As international concern about global warming continues to garner headlines, billions of dollars are being invested worldwide to reduce or slow the rate of warming, widely blamed on atmospheric buildup of carbon dioxide and other GHGs generated by burning ever-increasing amounts of fossil fuels. A lot of the effort focuses on reducing GHG emissions and on alternative sources of energy.
How carbon credits work
Imagine a landscape with a wall. Major industrial GHG emitters are on one side. Anyone taking GHGs such as carbon dioxide out of the air is on the other side. That's where farmers sit. No-till captures carbon dioxide and stores it as soil organic matter.
Every no-till acre on the prairies now can claim a carbon credit. Two zones, based on soil type, have been established. One northern-zone acre generates twice as much credit as one southern-zone acre. The difference is based on the type of crops grown in the region and the amount of carbon tied up in crop residue.
Five years ago industrial-scale GHG emitters began buying carbon credits as a way to encourage "green" practices that reduce emissions, and to "offset" their own emissions.
The "wall" in this landscape is where trading happens. Brokers, representing many small suppliers such as farmers, accumulate carbon credits from these suppliers, consolidate the credits into packages of tens of thousands of tonnes, and sell them to power companies and other GHG emitters.
How brokers sell these credits is optional. One might deal directly with a single large emitter; another might offer credits for sale to the highest bidder.
A broker could have several carbon reduction projects underway at any point in time. Each project is defined by a time period, a practice such as no-till, and a geographic region. In addition to finding buyers and sellers, brokers must also have credits verified as authentic before they can sell them.
How the game is played
Trading of carbon credits in North America began in 2003 on the new Chicago Climate Exchange (CCX). It is the only operating trading system for GHGs in North America. Just as stockbrokers use a stock exchange to bring buyers and sellers of corporate stocks together, accredited carbon credit brokers use the CCX to connect buyers and sellers of carbon credits.
For example, CCX-registered C-Green Aggregators Ltd., of Regina, put together a pool of 5.1 million no-till acres as its initial base for this new business. Between 2002 and 2006, that land had sequestered (accumulated as additional organic matter) 6.1 million tonnes of carbon. GHG emitters bought those "credits," and are continuing to do so. In 2007, Flatlander Environmental Services in Edmonton, became the second prairie broker registered on the CCX.
Now, a domestic exchange is emerging in Alberta. This January Alberta Environment launched an online registry project to help carbon credit buyers and sellers find each other.
As well, in the past few months, brokers have started to organize. The new Carbon Offset Suppliers Association of Alberta is working on standards and a code of conduct, says Keith Anderson, acting chair.
Also in Alberta, the non-profit organization Climate Change Central (CCC) is working with the provincial Farmers' Advocate Office to develop standards to govern the business. "And we're trying to standardize some of the contract terms," says CCC official Karen Haugen-Kozyra.
CCC has launched a website, Carbon Offset Solutions, as an information resource on the Alberta carbon market, and climate change policy generally in Canada. The website offers information on offset policy, regulation, quantification protocols and the offset market.
So now what?
If you're planning on getting into the carbon credits game, be cautious and expect changes. Rules are still being formulated and revised. Always check credentials as there have already been controversies over the claims of individual brokers in the U.S. Understand that contracts are not standardized yet. Brokers can offer to enroll your credits back to 2002 and forward to 2010, in various combinations and with different implications. Most contract offers do not say where the credits will be sold.
Expect new regulators. British Columbia, Ontario and Quebec have been developing regulations. American states are organizing for regional emissions regulations.
"In Canada, federal regulatory targets are planned for 2010, but a national offset market could start earlier. We're hoping it will begin in 2008," says the CCC's Haugen-Kozyra.
Federal regulations may affect provincial regulations, and could set 2006 as the earliest year of qualification.
