Introduction to Ag Carbon Trading. Phil Metzger, RC&D Coordinator USDA – Natural Resources Conservation Service Central NY Resource Conservation & Development Project, Inc. CO2 and Global Warming. What is Carbon Trading? .
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Phil Metzger, RC&D Coordinator
USDA – Natural Resources Conservation Service
Central NY Resource Conservation & Development Project, Inc.
A strategy for mitigating the emission of Carbon Dioxide (CO2) and other Greenhouse Gasses (GHG) through a “Cap-and-Trade” system
Regulatory programs that cap harmful emissions by limiting them though a permitting system and distributing the emissions permitted to different stakeholders.
These are called allowances, permits or credits
Stakeholders can buy and sell the rights to the permitted emissions or ‘credits’ after their initial distribution.
Goal of Cap-and-Trade is to prevent further increases in net emissions
Cap-and-Trade is a term that describes a market based system for controlling pollution.
Cap-and-Trade requires a regulatory body to set an emissions cap for the polluting industry as a whole for a set period of time
What would be a non-market based system?
What happens when emissions targets are met?
Methane (CH4) has a global warming potential of 23 times that of CO2
Nitrous Oxide (N2O) has a global warming potential of 298 times that of CO2
GHGs are multiplied by their conversion factor to obtain CO2 equivalents (CO2e)
This allows GHGs to be traded in CO2 units.
Regional Greenhouse Gas Initiative (RGGI) will regulate large electric power plants by “capping” their carbon emissions.
Agricultural Offsets can be purchased by power plants from farms to meet a small fraction of their “cap.”
Regional Greenhouse Gas Initiative (RGGI)
Chicago Climate Exchange (CCX)
Environmental Resources Trust (ERT)
CA Climate Action Registry (CCAR)
US EPA Climate Leaders (EPA CL)
Regional Greenhouse Gas Initiative (RGGI) – cooperative effort by 10 Northeast & Mid-Atlantic States to cap emissions of CO2 from electric power plants and subsequently reduce emissions by 10%.
Connecticut Delaware Maine
New Hampshire New Jersey New York
Vermont Massachusetts Maryland
RGGI program has targeted 2019 to complete the reductions
The focus is on the power plants because, for example, in NY they contributed approximately 25% of all GHG emissions of CO2 into the atmosphere in 2005
What will happen after the 2019 cap is achieved?
1. Landfill methane capture & destruction
2. Reduction in emissions of sulfur hexaflouride (SF6)
3. Sequestration of carbon due to afforestation
4. Reduction or avoidance of CO2 emissions from natural gas, oil or propane end-use combustion due to end-use energy efficiency
5. Agricultural manure management methane capture and destruction
Go to agcarbontrading.org for more information
Phil Metzger, RC&D Coordinator
USDA NRCS / CNY RC&D
Prepared with information from the agcarbontrading.org website developed and hosted by Central NY RC&D, contributions by Jeni Wightman, Stacie Edick, R. Neil Sampson, John Duxbury, John Marschilok, David Watson & Phil Metzger
Example (Simplified Illustration ):
1. Before regulation, emissions from this industry equaled 1000 tons per year, 500 tons emitted from each Plant A and Plant B.
2. The regulatory agency sets a Cap of 800 tons for the industry.
3. There are only two parties in this industry (very simple example!).
4. The regulatory agency assigns each party their Allowances. Plant A and Plant B each receive an Allowance to emit 400 tons
5. Plant A cannot reduce its emissions down to its Allowance of 400 tons, it cannot meet its emissions reduction target of 100 tons.
6. Plant B can reduce its emissions down to below its Allowance of 400 tons, exceeding its emissions reduction target of 100 tons by reducing actual emissions by 200 tons.
7. Plant B can sell 100 tons of its Allowance to other parties in the industry.
8. Plant A can purchase 100 tons of Allowances from Plant B, now it has met its total Allowance of 400 tons, so it is in compliance.
9. 500 tons from Plant A plus 300 tons from Plant B equals 800 tons total for the industry—so total emissions have not exceeded the Cap set by the regulatory agency.
What was the total emissions reduction for the industry?
10. The regulatory agency now knows that 800 tons is an achievable cap, and then reduces the cap further to 700 tons and the process starts again.
NOTE: IF Plant A could only purchase 70 tons of Allowances from Plant B, then Plant A could also purchase 30 tons of “Offsets” from non-regulated parties who engage in practices which reduce emissions or sequester carbon such as changing to improving energy efficiency or planting grass or trees.