Carbon offset projects may provide financial opportunities

There are two types of carbon market structures

Dr. Calvin Booker has been involved with Feedlot Management Service’s carbon offset projects since the company first explored the programs in 2009.

Opportunities are emerging for beef producers to benefit from carbon dioxide emission offset markets at both the cow-calf and feeder levels.

Agricultural emission offset projects are attractive to companies required to purchase emission offsets and those voluntarily making a positive environmental impact. The added benefits of these projects, a result of sustainable production practices, are often just as enticing.

“A lot of agricultural projects, they have more of a story,” said Max DuBuisson, policy director for Climate Action Reserve, a carbon offset registry based in California. “They have more co-benefits and they have more appeal to these buyers. This is something that they can put in their glossy corporate annual report and feel good about it.”

There are two types of carbon market structures. The first is the compliance-based market. In this, a large emitter is legally required to offset what it emits, so it purchases credits from a third party that is reducing its emissions. The second structure is the voluntary market, in which the buyer purchases credits voluntarily.

Carbon offset systems are based upon protocols, which are documents outlining the steps involved in an offset project, including what is eligible as a pro­ject and how it is monitored. Protocols are approved by organizations that issue credits, and third-party verification of credits is required.

DuBuisson outlined the requirements for issuing credits at the 2018 Canadian Forage and Grassland Association’s Conference. Emission reductions need to be measurable, verifiable and permanent. Credits may be worth up to US$14 in the California compliance market, while prices in the voluntary market vary based on the type of project.

Price uncertainty is a risk in the voluntary market, given that demand isn’t as certain as it is in the compliance market. But demand has generally been stronger in the voluntary market. Some experts also argue that enforced programs aren’t as effective as voluntary ones. Aaron Schroeder of Brightspot Climate, an energy and climate change consulting service, stated that projects that aren’t imposed upon a business or operation are generally more successful and producer-friendly.

“In my opinion part of the problem we have federally is that we set targets at the top level and they become imposed on us at the grower level, at the producer level,” he said. “I think we have a lot more success when… we build opportunities and build up a more bottom-up approach.”

Real-world application needed with agricultural protocols

Agriculture-related carbon offset projects have existed for some time in Canada, though the development process for some has been time-consuming. In the Alberta Emission Offset System, voluntary projects are quantified by protocols approved by the province and registered with the Alberta Emissions Offset Registry. Between 2002 and 2016, agriculture-related projects in Alberta removed almost 13 million tonnes of carbon dioxide equivalent (CO2e) emissions from the atmosphere, equal to taking around 2.5 million cars off the road.

Grasslands are a resilient and often overlooked opportunity for carbon sequestration but they could play a critical role in Canada. photo: Lisa Guenther

The most widely used of Alberta’s agriculture protocols is Conservation Cropping. This quantifies emission reductions by sequestering new carbon in the soil and decreasing nitrous oxide emissions through no-till practices, subsequently reducing fossil fuel use. While several other agriculture-related protocols have been explored, not all are operational. Some were discontinued due to difficulty in being implemented, while others are being further refined.

As agriculture only contributes around eight per cent of the province’s total emissions, and reductions may not be substantial on an individual scale, it’s generally more cost efficient to aggregate a project with other producers to accumulate offsets. Karen Haugen-Kozyra, president of environmental consulting firm Viresco Solutions, explained that a buyer in the compliance market is generally looking to purchase about 10,000 tonnes. However, she noted that buyers in the voluntary market may be interested in smaller volumes, adding that 30 per cent of offsets sold through the Alberta Registry are purchased by voluntary buyers.

Feedlot Health Management Services (FHMS) at Okotoks, Alta., was one of the first groups to explore Alberta’s feedlot-related protocols. This consulting service uses research and data-based technologies to help feedlots improve animal health and production efficiency. Dr. Calvin Booker, a veterinarian with a background in epidemiology, is a managing partner and research manager at FHMS. He has been involved with FHMS’s carbon offset projects since the company first explored the programs in 2009, working with the aggregator Trimble.

At the time, the only approved feedlot-related protocol focused on decreasing days on feed in order to lower greenhouse gas (GHG) emissions. However, putting this into practice proved difficult, as lighter animals were being placed into feedlots, requiring more days on feed to finish.

“As they began to feed them to heavier and heavier carcass weights, that also extended the days in the feedlot portion of the production system,” said Booker. “So the less days-on-feed method really didn’t apply to how the industry was evolving.”

Soon a second protocol was developed for GHG emission reductions, resulting from improvements in feed efficiency. FHMS worked with Trimble to create a pilot project with two feedlots, and in doing so helped identify issues with the original protocol. They worked with Alberta Environment to refine the protocol to be more functional, and have since created a second project with several feedlots.

The recording process requires four main pieces of data. Production lot information and diet composition are the first two, required to determine the dry matter feed conversion. The third dataset is carcass information, and the fourth is individual animal records tied to CCIA numbers. The CCIA numbers ensure that credits aren’t claimed on an animal more than once. These datasets are then used to determine whether there has been a reduction in emissions.

FHMS worked with Trimble to create a model for calculating GHG emission reductions, then connected the aggregator to the feedlots and quantified the data.

“We have the technological expertise between our PhD animal scientists, epidemiologists, and veterinarians and data collection systems to be able to put that together to build a model to be able to feed the data into the calculations that are required by the Alberta government as part of these protocols,” said Booker.

He suggests that interested feedlots work with both an aggregator and project developer. “They are going to have to work with, in most cases, some intermediary — a company like ourselves — to be able to connect the raw data to the GHG emissions formulas that are published by the government.”

In addition to understanding the process of verifying, serializing and selling offsets, an aggregator is key to bringing enough producers together to create a big enough package of credits for buyers, Booker said.

“The cost of getting all of the due diligence done is way too expensive if you’re going to do it at all the individual levels,” he said.

Together, FHMS, Trimble and the feedlots assess available credits, with a revenue sharing agreement between the three parties. “Based on what we have been able to determine so far, these GHG emission reductions from improved beef feedlot production efficiency are some of the very first in the world to be recognized and monetized through an official carbon offset program.”

For FHMS, the biggest challenge was the complexity of the process when they began the pilot. It took several years for them to work through the process, meet all the requirements and see any value from the credits.

“It’s not like filling out your income tax return and doing some calculations and figuring out whether you owe Revenue Canada money or you’re going to get some back,” he continued. “It would be much more like a large multinational corporation having to pay a team of tax accountants and tax lawyers to put together your corporate income tax return and figure out what’s left at the end of the day.”

Booker explained that FHMS was interested in these projects because of its interest in new technologies adopted by the feedlot sector for greater efficiency in production. In a number of cases, he said, this can result in reduced emissions.

“Being able to quantify that and claim those GHG emissions reductions, if there’s a method to do so, I think that’s probably an important aspect of being a competitive and sustainable business.”

Grassland conservation protocol in the works

A protocol for preventing grassland conversion to cropland is gaining attention in the U.S. When Climate Action Reserve first explored the possibility of creating this protocol, it was spurred on by a study showing that between 2008 and 2012, 5.7 million acres of grassland in the U.S. was converted to cropland.

“Of all the new cropland that came during that period, 77 per cent of it came from grassland, so there was a big need to provide more conservation dollars,” said DuBuisson.

This protocol has a narrow focus — protecting grassland that is considered “under threat of conversion to cropland” — in order to create a streamlined quantification methodology. One of the protocol requirements is that the landholder sets up a conservation easement, as land currently under an easement isn’t under threat of conversion.

Technical consultants at Colorado State University created the quantification methodology for this protocol, based on their land use change emission work for the U.S. Greenhouse Gas Inventory.

“They were able to stratify the U.S., break it up into different areas and then pair up grassland sites and cropland sites and run this daily model of how would this grassland site change if you converted it into the cropland sites,” said DuBuisson.

Climate Action Reserve and Viresco Solutions are currently adapting the Avoided Conversion of Grassland protocol for use in Canada. This originally started under contract with the Ontario provincial government and was to be applicable across Canada, but development halted after the province pulled out of the Western Climate Initiative.

Now, this protocol will operate through two different markets. The first is the Canadian voluntary market registry run by Climate Action Reserve, which aims to have the protocol ready for adoption in June. The second is the compliance market through the Alberta Emission Offset System, which has a longer regulatory approval process. At the time of writing, the group was waiting to hear if the proposal was approved.

“There will be subtle differences or some nuances to the protocols that are developed through both of those markets, but the underlying quantification and the methodology in each one will be the same,” said Jon Alcock, sustainability specialist with Viresco Solutions. The two protocols will also operate under each program’s set of rules.

The Canadian version uses the same framework as the U.S. protocol but relies on Canadian data and practices. The main difference in data is the baseline quantification of emissions due to grassland conversion to cropland, coming from Canada’s greenhouse gas inventory.

“They had done a lot of modeling of land use change, and they were able to sort of crunch those numbers and turn them into emission factors that we could use. So the formulas in the protocol don’t really change, but the numbers you put into the formula are different in Canada than they are in the U.S.,” said DuBuisson, speaking in February.

They are currently creating a pilot project under this protocol, working with industry partners to find interested producers. They plan to use up to 10 sites in Western Canada, with one or two specifically in British Columbia and the rest across the Prairie provinces. The Southern Alberta Land Trust Society, the Nature Conservancy of Canada, Canadian Forage and Grasslands Association, Alberta Beef Producers, Saskatchewan Cattlemen’s Association and Saskatchewan Stock Growers’ Association are involved in the pilot project.

Implementing the U.S. version of this protocol has given DuBuisson insight into which situations are best suited for these projects. There are currently 10 American grassland projects registered with Climate Action Reserve, some of which are run by a single land trust.

“The land trusts in general have emerged as our target for outreach because doing the carbon project kind of dovetails nicely with the conservation work that they’re already doing. Monitoring the easement is already something that makes sense to them and they already take a long-term view, so it works where the landowner has a long-term vision and is interested in protecting their land and managing it over a very long period of time,” he explained. “So it’s not going to be interesting to a huge swath of landowners, but it could be very interesting to others.”

Based on the protocol’s American counterpart, DuBuisson predicts interest in the voluntary market because grassland conservation has a good story attached to it. While credit prices vary, they tend to range from US$4 to US$8 in the American voluntary market.

“When you see carbon projects that do nothing but reduce greenhouse gas emissions — they have no other interesting or useful benefit to society or the environment — they tend to be cheaper,” he said at the CFGA conference. “It’s these projects like grassland that tend to be more expensive per credit because you’re working with a complex system and you’re achieving additional benefits.”

Alcock noted that this protocol likely won’t have major financial implications, given prices for carbon credits, but it may be an incentive for producers already considering other conservation efforts.

“To those landowners that are on the fence or thinking about getting an easement put on their land, this should be another revenue stream that maybe makes that decision a little bit easier.”

Project update: Climate Action Reserve is working on a grassland conservation protocol for Canada’s voluntary carbon offset market. They originally expected to have it ready for adoption in June, but now they’re expecting it to be ready for October.

About the author

Field editor

Piper Whelan

Piper Whelan is a field editor with Canadian Cattlemen. She grew up on a purebred, Maine-Anjou ranch near Irricana, Alta., and previously wrote for Top Stock, Western Horse Review, and various beef breed publications.



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