The carbon offset market is part of Alberta’s strategy to reduce greenhouse gas emissions. By adopting an agricultural practice improvement to create carbon offsets for trade in Alberta’s carbon market, you can earn extra income, reduce your carbon footprint and realize long-term benefits to your farm operation.
What is a carbon offset
A carbon offset is a reduction in greenhouse gases in one area that counterbalances the emissions created in another. Large industrial operations that emit over 100,000 tonnes of greenhouse gases generate about half of Alberta’s total emissions. These operations have been regulated since 2007 and are required to reduce their emissions intensity.
Operations were given 4 choices:
- Increase efficiency, for example by cogeneration.
- Pay a set provincial carbon price into a fund now called the Technology Innovation and Emissions Reductions (TIER) fund.
- Purchase offsets from facilities that have exceeded their reduction requirements.
- Pay for emissions reductions in the other half of Alberta’s emission total, the non-regulated part of the Alberta’s economy, which includes agriculture.
This last method created a market for carbon offsets in agriculture as well as other sectors. The keys here are that the offset system is a market, not a program like Growing Forward or the Sustainable Canadian Agricultural Partnership, and it is one part of a much larger system.
Carbon offsets are created by following Alberta government-approved procedures called ‘protocols’. As of April 2021 there are 19 protocols, of which agriculture has been using 4:
- Conservation Cropping
- Fed Cattle (Reducing Greenhouse Gas Emissions from Fed Cattle)
- Microgeneration (Distributed Renewable Energy Generation)
- Biogas (Anaerobic Decomposition of Agricultural Materials)
Conservation Cropping, much as its predecessor the Tillage protocol, has been by far the most widely used by agriculture. Fed Cattle has seen some adoption by feedlots, Biogas by some large biogas plants, and Microgeneration has just recently become operational. Some protocols don’t apply to agriculture, and some have been too difficult to use or uneconomic so far.
While the Alberta offset system provides a market for carbon, it comes with a number of limitations. As well as building up carbon or reducing greenhouse gas production, an activity to be approved as an offset protocol has to be beyond business as usual, proven by scientific research, quantifiable and verifiable. A problem in any one of these areas can prevent an offset from going ahead. This has happened with forages and trees.
The value of a carbon offset varies depends on:
- the set provincial carbon price
- how close the offset selling price gets
- the farmer/aggregator split
- the amount of carbon tonnage
For example, using the Conservation Cropping Protocol with a $23.00/tonne offset sale price and a 2/3 to 1/3 farmer/aggregator price split would result in:
- 1000 acres X 0.113 tonnes/acre = 113 tonnes carbon
- 113 tonnes carbon X $15.33/tonne = $1732 or $1.73/acre
Dry Prairie area
- 1000 acres X 0.057 tonnes/acre = 57 tonnes carbon
- 57 tonnes X $15.33/tonne = $874 or $0.87/acre
The key to what a producer will receive in income is the amount of carbon tonnage. The amount the offset sells for is usually somewhat under the carbon price set by the Alberta government, and aggregation companies take a portion to get offsets in a sellable state and sold. However, the main factor driving the offset return to the farmer is the carbon yield. The ‘Carbon Price’ is listed per tonne, and with Conservation Cropping the carbon ‘yield’ ranges from about a tenth to a twentieth of a tonne an acre in 2021. With the Microgeneration Protocol the yield is set at just under a kg (0.57) per kWh – less than 1/1000 of a tonne.
The kinds of records needed depends on the type of offset. The Conservation Cropping Protocol requires a farmer to prove the ownership of the field and the field practice (for example, field location, crop, machinery used), while the other protocols are quite different. For example, the Microgeneration Protocol requires accurate power production records.
In the Conservation Cropping Protocol, ownership of carbon offsets default to the landowner. The owner’s signature is therefore needed to claim the offset. However, records kept by the renter are also required, so who claims the offset is a matter of negotiation between renter and landowner. Keeping in mind the income per acre is small, the renter usually ends up claiming the offsets.
Technically, aggregators are not needed to use the offset market. In practice, the large industrial facilities that purchase offsets prefer to buy carbon offsets in large quantities and sign a single contract, rather than negotiate a number of contracts for small volumes. Aggregators act as project developers/compilers, plus manage the numerous requirements that go into creating and selling a viable offset. These include:
- managing data collection
- third party verification
- marketing and selling
Current aggregation companies working with the Conservation Cropping Protocol as of April 2021:
- Radicle (formerly Carbon Credit Solutions): 1-877-912-9132
- Farmers Edge (for their agronomic customers): 1-866-724-3343
- Trimble (formerly AgriTrend) Aggregation: 1-877-276-7526
While the offset selling price has been normally divided by around a 1/3 to 2/3 Aggregator/Farmer split for Conservation Cropping offsets, this can vary. Other protocols may be different.
The information contained here is the interpretation of Agriculture and Irrigation. Alberta’s carbon offset system is managed by Alberta Environment and Protected Areas. Offset projects must comply with the most recent quantification protocols and program requirements outlined under the Alberta Emission Offset System.
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