The province of Alberta has been operating a provincial carbon offset trading program for the past two years. Canada’s carbon offset system, which will function very much like the one in Alberta, is on track to launch early in the new year.
The demand for carbon offsets in Alberta was created by provincial legislation passed in December, 2003 that gave Alberta Environment the authority to set emission reduction targets and enforce mandatory reporting on some sectors. Since July 1, 2007, Alberta facilities in regulated sectors emitting more than 100,000 tonnes of greenhouse gases (GHG) must annually, by law, reduce emissions by 12 per cent every year.
Buying Alberta-based carbon offsets is one way large emitters can meet their target. They can also make operational improvements to reduce emissions, or contribute to a special climate change fund.
Carbon offsets are supplied voluntarily by sectors with the capacity to significantly reduce or store GHG emission — agriculture, forestry, waste management, renewable energy industries.
One carbon offset credit is equivalent to one tonne of GHG. The big-three natural gases in Canada’s 2006 GHG Inventory are carbon dioxide (C02), methane and nitrous oxide. All are converted into one common denominator called CO2 equivalents (CO2e) for reporting and trading carbon offsets.
Alberta requires regulated industries to purchase only Alberta-generated offsets at a set price, currently $12 per tonne. However, Alberta producers are free to sell their offsets anywhere in the world that accepts the Alberta protocols. However, market prices aren’t too attractive right now. The Chicago Climate Exchange price plummeted to 10 cents per tonne in September from $1.75 in May and the June 2011 future price on the Montreal Climate Exchange was trading for $3 per tonne CO2e at press time.
From July 1, 2007 to Aug. 31, 2009, close to 1.8 million tonnes of Alberta-generated agricultural carbon credits were purchased for anywhere from $9 to $13.50 per tonne CO2e. Call it an average $10 per tonne, so about $18 million in total. Most of these were generated using Alberta’s reduced or no-till management protocol. The province currently has three protocols in place for beef operations, and a fourth is under development.
Alberta beef protocols
Establishing a GHG protocol is a lengthy process that requires a significant investment of money and time, says Dr. John Basarab, a research scientist with Alberta Agriculture and Rural Development at Lacombe, and a member of Alberta’s climate change/ greenhouse gas technical committee. Alberta protocols, like Canada’s, EW based on the ISO (international standards organization) standard. That requires expert involvement, scientific methodologies, a peer review process and documented transparency.
The GHG technical committee develops the protocols.
“When the committee members look at management practices that could be developed into protocols, they consider what drives producers to make changes. First and foremost, the practice has to make their businesses more profitable and produce a better end product,” Basarab says. “The carbon credit is an add-on bonus.”
The protocols in place related to beef production earn credits based on reduced tillage and reducing methane production from enteric fermentation or nitrous oxide emissions from manure production. Methane, created by the normal digestion processes of all ruminants, is released into the environment primarily through belching. Nitrous oxide is a product of manure degradation.
The three beef protocols involve: Feeding edible oils in background or finishing diets to reduce methane emissions. Basarab says this one hasn’t been extensively used because of the cost of incorporating edible oils into beef diets. The estimated value of credits using this protocol is $1 to $2 per head.
Using new technology to reduce the number of days on feed in the feed-
IS CARBON CREDIT TRADING FOR YOU?
Just because you grow forages doesn’t mean you would qualify for carbon credits or that you would want to get involved in trading them, if and when scientists develop the necessary protocols, says pasture researcher Vern Baron.
“Additionality,” which is the concept of showing that there has been a change from the normal or average operation, is one of the issues you’d have to face. “If you continue with business as usual in your farm or pasture management, you won’t be eligible,” explains Baron. “In any Canadian system that has been described, including the one in Alberta, you have to show that as of 2002 you’ve made such a big change in your practice that it’s had a significant net impact on atmospheric CO2.”
You’d also want to consider whether the value of bringing a protocol into practice is worth enough in the marketplace to go through all of the paperwork and record-keeping to verify it.
Another question is whether committing to a beneficial management practice (BMP) to collect carbon credits will have an impact on the flexibility of your business. You are legally bound to use the BMP for the period specified in the contract. Meanwhile, the cost of production, markets and weather will be continually changing.
“Adopting a BMP should improve farm profit apart from the environmental advantage and the carbon credit income add-on. It’s probably good for the environment and it’s probably good for business in that good pasture management is a good business practice,” Baron says. “But right now, we don’t know what the carbon credit add-on will pay back to the farm business and we don’t have a system to weigh this against. We have to begin with the development of protocols and that will take time.”
Many producers don’t generate enough credits to warrant the time and cost of trying to market them on their own. Alberta beef researcher John Basarab says an aggregator may be the answer.
Aggregators in Alberta group credits from large tracts of land into packages. They calculate the credits generated by reduced-tillage practices, register the carbon offset, and look after the sale. It’s the same service a feedlot could provide, grouping large numbers of cattle together.
The Alber ta protocol, sample contracts, lists of aggregators and brokers, offsets for sale, and a lot of sound advice is available on the Alberta Climate Change Central website, www.carbonoffsetsolutions.ca/.
Alber ta’s beef protocols were among the 40 external protocols originally listed in August, 2008, for fast tracking into the Canadian carbon offset system to get it up and running. A number of other issues at the national level took precedence earlier this year and the whole process of establishing Canada’s system ground to a halt until June 2009, when a revised overview and the remaining two guides were published for public comment.
Alberta Environment’s protocols for afforestation, reduced/no-till, wind power, and anaerobic biodigesters are among the 12 protocols listed as eligible to be adapted to the national program. Other project types can still be considered. The national protocol list will be updated quarterly. You can follow developments on Environment Canada’s website, www.ec.gc.ca.
lot — another $1 to $2 per head in credits.
Shortening the life cycle by reducing the age at slaughter while producing the same amount of beef thereby reducing methane and manure volumes. This practice generates about $4 per head in credits per month that the age to slaughter is shortened.
“So if feedlots feed edible oils and reduce the number of days on feed and reduce the age at slaughter, that’s a possible $12 to $14 per head in carbon credits to help reduce the cost of production,” Basarab says.
The newest protocol under development deals with selecting cattle for feed efficiency. The relatively new science on residual feed intake is the foundation for this protocol, which would create credits worth an estimated $1 per head for graziers and feedlots.
Pasture protocols coming
It may seem like carbon sequestration and forages go together like cows and pasture, yet developing protocols around forages and pastures for the purpose of carbon credit trading is not as straightforward as you might think.
A preliminary investigation found a lot of research gaps that need to be closed in order to validate credit claims related to forages.
Pasture protocols must consider the complex interaction between livestock and forage, says Vern Baron, a forage scientist with Agriculture and Agri-Food Canada at Lacombe. On one side the plants remove CO2 from the atmosphere, on the other side cattle generate methane and nitrous oxide. Figuring out the net gain to the environment from grazing is a complex calculation involving the age of the stand, forage quality, fertilizer use, pasture production and class of cattle, just for starters. Each of those change with climate from year to year and with different management practices.
“At the end of the day, you’re trading a commodity — CO2e. When you trade grain on the futures market it’s not hard to come up with a physical commodity. Coming up with CO2 is like coming up with air,” Baron says. Just as grain contracts describe characteristics such as weight and grade, there has to be a way of describing the CO2 that has been removed, stored or saved in order to have legal contracts.
Baron and other researchers are looking at three possible forage protocols: rangeland, conversion of cropland to forages and tame pasture management.
There is a solid base of knowledge about carbon sequestration potential of native rangeland in the semi-arid region. But a protocol may not be very popular, as its dollar value would probably be low. Though rangeland soils store vast amounts of organic carbon, the rates of sequestration are poor and highly variable. And most of the native range in Alberta is on public lands.
Conversion of cropland to forage and tame pasture management protocol are more promising, particularly on productive Parkland soils where the rate of carbon sequestration is likely to be greater. Unfortunately, the research needed to document a protocol on these pastures has been difficult to find funds for in the past.