Agriculture – Offsets Brian McConkey Agriculture and Agri-Food Canada

1. Agriculture – OffsetsBrian McConkeyAgriculture and Agri-Food Canada • Sector is engaged • All major farm groups aware of the issue and opportunities for farmers • Successful model of offset system in Province of Alberta • Alberta protocols fast-tracked in future Canadian Federal System?

2. Alberta Offset System (http://www.carbonoffsetsolutions.ca/index.htm) • First jurisdiction in North America to have hard caps on emissions • Applies to all facilities that produce over 100,000 tonnes of CO2e • Baselines established from average emissions intensity from 2003-05 • Targets -12% off of baseline •  Facilities meet targets through: • Emission intensity gains from own operations • Invest in offsets • Pay (“invest in”) the government-managed Climate Change and Emissions Management Fund at CDN$15/tonne CO2e • Funds used to develop or invest in Alberta-based technologies, programs, and other priority areas • Effective cap on value of offsets • .

3. Alberta Offset System • Offset Protocols were based heavily on draft developments for a national Federal offset system in 2004-05 • Be real, demonstrable, quantifiable; • Not be required by law or paid by public funds; • Have clearly established ownership; • Be counted once for compliance purposes; • Be verified by a qualified third party • Offset Protocols must follow ISO 14064 part b • Life cycle-like analysis • Requires that all GHG sources and sinks controlled, related, or affected by the project be considered • Reductions are all relative to baseline established as part of protocol

4. Alberta Offsets- Agriculture • Protocols have been established for several agricultural activities • Edible oil in beef diets • Reduced slaughter age of beef cattle • Improved hog feeding • Improved handling and spreading of hog manure • Biogas production from animal manures • Adoption of reduced tillage (only protocol involving soil sinks)

5. Alberta Offsets- Agriculture • Protocols being developed (where knowledge good and life-cycle reasonably simple) for: • Summerfallow Reduction • Protocols being considered (where knowledge not so good and/or life cycle relatively complex) for • Conversion to Perennial Forages • Residue Management • Rangeland Management • Beef - Residual Feed Intake • Pasture Management • Soil Amendment • Beef grazing/forage system improvements • Nitrogen Use Efficiency • Wetlands Management (restoration)

6. Offset Implementation • Government involvement and investment has been essential to protocol development • No protocols developed by private sector exclusively • Non C-sequestering practices follow the “industrial model” • Documenting start of practice relatively simple • No permanency issues • However, C sequestration by no-till has been most successful in terms of delivering offsets to market • Over half of total offsets • Large area so attractive business for aggregators • All have used the so-called “default coefficient method”

7. Eligibility- No-till • Under the “default coefficient” method, all farmers using practice in project area are eligible • Approach adapted from draft Federal offset system protocol of 2005 • However offset is only for C sequestered from the proportion above baseline of adoption at time of project eligibility (2002 in Alberta, 2000 in federal system?) • E.g. if 30% of land in no-till in 2002 then only 70% (i.e. 100-30%) of the C sequestered under no-till is included for crediting (i.e. assume 30% of land in project was in no-till at start of project) • Crediting period >= 2002 in Alberta (>=2008 in Federal system?)

8. “Default Coefficient” Method • Addresses problem of practical infeasibility of determining tillage history • Provides incentive for maintenance of C sequestering practice • Rewards early adopters • Partially penalizes late adopters • Removes perverse incentive to stop C-sequestering practice in hope of being able to make land eligible at later date

9. Verification • Have been much experience with verification under Alberta, CCX, and Federal trial systems • Third-party verification always been supplemental activity to existing businesses (e.g. financial accounting, crop insurance) • No-till verification hierarchical • Desktop verification (general) • Area farmed, documentation of eligible machinery, etc. • Farm visit (audit) • check machinery, fuel purchases, etc. • In-season field (exceptional audit) • Field inspection to determine if no-till was practiced • (No penalty/no reward for voluntary reporting that no-till was not practiced has been proven successful)

10. Permanence and Liability • Alberta system • Government of Alberta has discounted the amount of the offset (10-12.5%) and accepted liability for any future reversals. • Discount includes the permanent reductions (reduced N2O and fossil fuel emissions) and C sequestration • “Breakthrough” that makes C sequestering offsets economically feasible • No monitoring after project so no plan to know if there has been reversals in specific projects • Canadian Federal System ? • This was stopper for initial development of C-sequestration protocols in mid 2000s

11. Relationship to Inventory • Need for “bottom line” that determines if Government targets have been met • Captures “leakage” within country • Trading with under Kyoto Protocol requires any emission reduction be assigned to RMU or AAU • Alberta used national inventory GHG quantification methods where possible • Federal system?

12. Summary • Offsets provide large opportunity for agricultural sector • Have good experience with several offsets • Anticipated offset values will never drive agricultural practices • If left to private sector alone to develop protocols there will likely be few agricultural offsets • C-sequestrating offsets will require government underwriting of liability for reversals • Too complex and unknown risk to expect this to be accomplished through private sector