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Carbon Transactions. Karen Haugen- Kozyra , M.Sc. P.Ag . Principal, KHK Consulting June 17, 2010 Agriculture and Carbon Markets: Making Carbon Count Washington, DC. The Session.

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carbon transactions

Carbon Transactions

Karen Haugen-Kozyra, M.Sc. P.Ag.

Principal, KHK Consulting

June 17, 2010

Agriculture and Carbon Markets: Making Carbon Count

Washington, DC

the session
The Session

The goal is to negotiate a transaction, not for anyone to necessarily reach compliance or sell all their offsets

This is realistic, not real

Profiles, term sheet, and negotiated worksheets are applicable only to what we are doing today.

parties who may be involved
Parties who May be Involved

Project Developer – The person responsible for the project activity

Aggregator – can also be the project developer; aggregates numerous small projects to sell at volume

Registry – market infrastructure for tracking projects and serializing tonnes

Broker – matchmaker for sellers and buyers

parties who may be involved1
Parties Who May be Involved

Validator – a third party professional hired to assure the project has a high likelihood of success

Verifier – a third party professional hired to check that the project achieved what it said it would

Buyer – party that purchases potential offsets from project developer/aggregator

Program Administrator for submission of potential offsets

supply side
Supply Side

Ag Projects

Each group is assigned a profile outlining their emissions, reduction/removal opportunities and the costs associated with developing those opportunities.

Aggies Co-op

Angus’s Beef

Annie’s Anaerobic Digester

Goal: To evaluate the profile and arrive at a position for negotiations. Negotiate transactions, based on position, for the highest price possible with an acceptable risk profile.

considerations for negotiations
Considerations for Negotiations

Sellers :

Understand your Project and what you have to sell (which years, all your acres, some of the acres. Look at options.

Do we invest in the science to develop custom coefficients – how does that affect costs?

Transaction terms – who pays for validation, who pays for verification?

Defaults – will you use reserve holdbacks? How are they allocated if 100% delivery?

buy side
Buy Side

Buyers

Buyers are regulated entities…

Sonny’s O&G

Enercorp Chemicals

Ferty’s Fertilizer

Power You Power Company

Goal: To transact with Ag Producers. To acquire carbon offsets at the lowest cost possible

considerations for negotiations1
Considerations for Negotiations

Buyers :

Know the rules -assume projects have rules and qualify generically for the programs

What about future tonnes – do you secure them with an option?

Transaction terms – who pays for validation, who pays for verification?

Addressing Risk of a Default on Delivery – will you use reserve holdbacks? How are they allocated if 100% delivery?

price
Price

Price usually last negotiation item

Price Collar on price = $15/tonne

Some selling for below this

Price reflects risk in terms/contract and value

session process
Session Process

Devise a strategy for how your group will approach project development, selling and/or acquisition

By the end of this task, the group should have a clear understanding of the basic price and negotiating terms for approaching other parties in the workshop.

15 Minutes

session process1
Session Process

Then approach other parties and work to negotiate a favorable transaction.

Use the knowledge gathered from presentations and apply them to the negotiations

Each group will receive worksheets to record negotiations and transactions

15 Minutes

session rules
Session Rules

Enjoy the process. This is an interactive event. It is hoped in addition to learning about negotiating carbon transactions, each participant will also build relationships.

Testing learnings of the day

Participants are limited in their transactions only by the potential offsets available.

wrap up
Wrap-up
  • What issues/problems did you experience?
  • Were you able to overcome them? If so how?
  • Did you come to an agreement?
  • Describe agreement – terms, price, unique aspects