Carbon Trading in
Canada
Conservation Agriculture Carbon
Offset Consultation
October 29, 2008
Don McCabe
Soil Conservation Council of Canada
Presentation Outline

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Environmental Concern to Market
Solution
Real, Measurable, Additional
(Government and Farmer
Definitions)
Baselines and Start Dates
Market Participation (ownership,
aggregation, liability, permanence)
Environmental Concern
Market Solution

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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

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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
Alberta/
Accounting
Rigor
Canada
Standardizing
means making
policy decisions!
CDM
GHG
Protocol
CCX
Ease of Use
Others?
ISO 14064-2
Policy Neutral,
Flexible
Real, Measurable,
Additional
Process Definitions
In Canada
And some under
construction…..
Emission Reduction
Criteria Considerations

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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

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

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, Measurable,
Additional
Farmer Definitions
Real Environmental Value


Water filtration and storage
Biodiversity (numbers, above
and below)
Measurable & Additional

Soil organic matter testing

Carbon sold as a commodity
C sequestration as a Commodity
Sell Credits
Repurchase
Credits
Maintenance
Liability
Measurable & Additional

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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 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

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
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
•
Variables required based on farm location / dominant soil
zone:
• Reduction Factor / Sequestration Factor For Relevant Till Practice in
Relevant Area and Geographic Zone
Region
Tillage
Change
10 year CO2E
(t CO2E / ha)
FT to NT
0.25
FT to RT
0.20
RT to NT
0.08
NT to FT
-0.25
RT to FT
-0.20
NT to RT
-0.08
FT to NT
0.41
FT to RT
0.16
RT to NT
0.26
NT to FT
-0.41
RT to FT
-0.16
NT to RT
-0.26
Energy
(t CO2E / ha)
0.1649
0.1186
0.0463
East
East
Central
-0.1649
-0.1186
-0.0463
0.1649
0.1186
0.0463
-0.1649
-0.1186
-0.0463
Map of Soil Zones
Ensuring Incrementality
By 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
Protocol
Baseline Condition
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 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
Liability/Permanence
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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
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
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
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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!
Questions?
Don McCabe
don.mccabe@ofa.on.ca