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Carbon Trading in Canada. Conservation Agriculture Carbon Offset Consultation October 29, 2008 Don McCabe Soil Conservation Council of Canada. Presentation Outline. Environmental Concern to Market Solution Real, Measurable, Additional (Government and Farmer Definitions)

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carbon trading in canada

Carbon Trading in Canada

Conservation Agriculture Carbon Offset Consultation

October 29, 2008

Don McCabe

Soil Conservation Council of Canada

presentation outline
Presentation Outline
  • Environmental Concern to Market Solution
  • Real, Measurable, Additional (Government and Farmer Definitions)
  • Baselines and Start Dates
  • Market Participation (ownership, aggregation, liability, permanence)
market solution
Market Solution
  • Kyoto and Canada

- recognition of soil carbon sequestration

  • Chicago Climate Exchange

- commercialization

  • Alberta’s compliance market

-soil offsets part of the solution

  • World Market Evolution
key elements of a performing global carbon market
Key Elements of a Performing Global Carbon Market
  • Competitive energy markets
  • Common, fungible units of C
  • Standardized reporting of GHG data
  • Transferability of assets across boundaries

Number One Risk – Lack of a Common Standard

- World Bank, State and Trends

of the Carbon Market 2007

carbon accounting standards
Carbon Accounting Standards

Alberta/

Canada

Accounting Rigor

Standardizing means making policy decisions!

Others?

CDM

GHG Protocol

CCX

Ease of Use

Policy Neutral, Flexible

ISO 14064-2

real measurable additional process definitions

Real, Measurable, Additional Process Definitions

In Canada

And some under construction…..

emission reduction criteria considerations
Emission Reduction Criteria Considerations
  • Real Reductions – beyond business as usual (Establish valid and defensible baseline – activity and emission factors are the best available (post 2000)
  • Measurable, Quantifiable – agreement on best available science and activity data – develop a Protocol. Must stand up to a Review Process.
  • ‘Verifiable’ – Tracking and reporting process to support the Program - clear, defensible, and have good QA/QC procedures.
quantification protocols
Quantification Protocols
  • Canadian Government will have Approved Protocols to ensure ‘Real, Measurable and Verifiable’ criteria are met.
    • Science-based
    • International compatibility
    • Streamlined use
    • Transparency and consistency
    • Reduced costs and administration
    • Provides certainty for investors – GHG tonnes reduced

Defines the Supply – Size of the Reduction

process definitions
Process Definitions
  • Additionality (Incrementality)
    • GHG reductions/removals should only be recognized for project activities that would not have happened under business-as-usual
  • Reversibility
    • In removal projects, sequestered carbon can be released to atmosphere if activities terminated
  • Discontinuity
    • Ag projects often involve many small sites
real environmental value
Real Environmental Value
  • Water filtration and storage
  • Biodiversity (numbers, above and below)
measurable additional
Measurable & Additional
  • Soil organic matter testing
  • Carbon sold as a commodity
slide17

C sequestration as a Commodity

Repurchase

Credits

Sell Credits

Maintenance Liability

measurable additional18
Measurable & Additional
  • Soil organic matter testing (M & A)
  • Carbon sold as a commodity (M&A)

- Contracts and aggregators

- reversibility and discontinuity solutions

Not too much of anything in farming to a farmer is “Business as Usual”

presentation outline19
Presentation Outline
  • Environmental Concern to Market Solution
  • Real, Measurable, Additional (Government and Farmer Definitions)
  • Baselines and Start Dates
  • Market Participation (ownership, aggregation, liability)
baselines and start dates
Baselines and Start Dates
  • Baseline types

- Project specific

- Sector specific (eg. composting)

BUT for tillage protocols, Canada requires regional flexibility due to different methods of no till, climates and crop production.

basic credit creation in tillage
Basic Credit Creation in Tillage

GHG reduction = Coefficient X Activity

Development of the Coefficients:

  • Canada emissions inventory approach for IPCC Tier 2 coefficients - changes in Soil Organic Carbon using all realistic cropping-tillage-climate-soils management combinations at the SLC (soil landscapes of Canada) analytical unit
  • Soil C Change Coefficients were weighted-averaged up to the soil reporting zones for CO2e
  • Fuel consumption changes and N20 changes with tillage were derived as well and scaled to similar units
tillage protocol
Tillage Protocol

Variables required based on farm location / dominant soil zone:

Reduction Factor / Sequestration Factor For Relevant Till Practice in Relevant Area and Geographic Zone

Map of Soil Zones

ensuring incrementality by baseline and start date definition
Ensuring IncrementalityBy Baseline and Start Date Definition

Adjusting the Baseline Coefficients – ensures only incremental carbon is rewarded

  • The quantification science uses a discounted or ‘adjusted baseline’ to subtract out carbon accrued to date (2000 start year)
  • Focus is on the new C removals, not the new activities – only exception to the rule (maintaining the sink is important)
  • The coefficients in some regions are nearly zero due to high rates of adoption, or discounted by 40 to 60% in others.
  • Allows early adopters to gain credit and maintain the sink, alleviating a perverse incentive to till soil to enter the Offset system.
tillage system management protocol26
Tillage System Management Protocol

Relevant SS’s:

Energy use from:

B9 Pesticide Production

B3 Seed Distribution (On-Site)

B7 Fertilizer and Lime Distribution (On-Site)

B11 Pesticide Distribution (On-Site)

Carbon sequestration under B13 Soil and Crop Dynamics

Nitrogen emissions under B13 Soil and Crop Dynamics

presentation outline27
Presentation Outline
  • Environmental Concern to Market Solution
  • Real, Measurable, Additional (Government and Farmer Definitions)
  • Baselines and Start Dates
  • Market Participation (ownership, aggregation, liability, permanence)
market participation
Ownership

Carbon credits created by farmers on their own land or through contracts with landlords belong to landowners (SCCC, 2003)

Aggregation

Needed to “bulk” the carbon commodity, ensure low transaction costs and liquidity to market

Market Participation
market participation29
Market Participation

Liability/Permanence

  • Canadian Govt. wants temporary (buyer liable, 1 yr.) and permanent credits (25 yr? period, producer liable for reversal)
  • Market buyers are clear. Temporary credits are for TEMPORARY TARGETS. No market here!
  • Producers require protection
alberta approach to permanence
Alberta Approach to Permanence
  • Government backs the liability
  • Assurance Factor
    • Based on expert opinion
    • Risk Assessments - frequency of reversal of tillage practices
    • Reversal risk – shaves off C for every tonne created – into Reserve-Holdback enabled by government policy
    • Backs the liability of a reversal of Soil C
    • Farmers must disclose reversal of practice - no credits earned for that year (no liability on farmer/project developer)

Takes a Time-discount problem and solves it with a volume-discount reflecting historical reversal frequency

summary
Jenny’s Equation for soil formation

Soil=f(cl,pm,r,o,t)

Soil is a function of climate, parent material, topography, biota and time

Farmers are managers of the carbon and nitrogen cycles.

Biota and time are the factors that can be managed here.

Summary
summary32
Summary
  • Farmers have real, measurable, additional carbon credits to offer world markets
  • Clear policy is needed and will make or break the opportunities
  • Commercialization can maintain and enhance sustainability with policy harmonization
  • Stay tuned……..
thank you

Thank You!

Questions?

Don McCabe

don.mccabe@ofa.on.ca