Carbon Markets for Landowners
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The benefits of climate friendly practices for landowners and how to engage in the carbon markets.
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Carbon Markets for Landowners
- 1. Carbon Markets for Landowners Agriculture, Forestry, and Biocarbon Teresa Koper
- 2. About The Climate Trust 501(c)(3) nonprofit Over 16 years of carbon financing experience Mission: Provide expertise, financing, and inspiration to accelerate innovative climate solutions that endure www.climatetrust.org
- 4. Benefits of Climate Friendly Practices • Benefit financially by earning environmental credits • Co-Benefits: • Mitigate climate instability • Be part of the solution for others
- 5. Introduction to Carbon Markets • Rewarding greenhouse gas (GHG) emission reductions and/or sequestration practices • Market purpose? • Why Carbon?
- 6. Carbon Markets • Voluntary Markets • Compliance Market - CA Cap and Trade • Pacific Coast Climate Action Plan
- 7. Standards Voluntary Standards • American Carbon Registry (ACR) • Climate Action Reserve (CAR) • Verified Carbon Standard (VCS) Compliance Standard • California Air Resources Board (CARB)
- 8. Carbon Accounting Rules • Baseline – business as usual scenario • Additionality – reducing GHG emissions to below the baseline (additional to business as usual) • Permanence – permanent reduction of emissions • No Leakage – direct emissions elsewhere caused by the emission reduction in the project/program
- 9. Agricultural Method Types • Nutrient Management • No-till or low-till farming • Avoided Land Conversion • Improved livestock grazing on rangeland
- 10. Soil has great potential to capture GHG • Carbon Sequestration • Undisturbed land • Soil building practices–
- 11. Avoided Conversion of Land • Keep undisturbed soil/vegetation intact • Conservation Easements (timing matters) • While Federal funds for conservation may be decreasing, environmental markets are picking up momentum
- 12. COMET Farm – explore scenarios • See what specific practices save, in terms of GHG emissions and sequestration • Whole farm and ranch – carbon and greenhouse gas accounting • cometfarm.nrel.colostate.edu
- 13. Forestry Forests sequester large amounts of GHGs • Avoided Conversion • Improved Forest Management • Afforestation/Reforestation • Reduced Emissions from Deforestation and Degradation (REDD)
- 14. Many commonalities across Standards, but differences matter • Project Start Date and timing of first and subsequent Verifications • Included carbon pools • Length of commitment, flexibility mechanisms • Forest Certification requirements • Treatment of Aggregation
- 15. Biocarbon natural systems play an essential role in climate stability • Compost • Dairy Waste Digestion • Organic Waste Digestion • Biochar and Biofuels Production • Carbon Sequestration
- 16. Avoided Methane Carbon Credit Projects that digest eligible feedstocks and combust biogas can earn carbon credits for avoided methane emissions.
- 17. Eligible Feedstocks Livestock Protocol Organic Waste Digestion Protocol • Dairy or swine manure • Post-consumer food waste •Industrial waste previously managed in an anaerobic lagoon
- 18. Avoided Methane Carbon Credit Rule of Thumb: 2,500 cow digester generates ~3.5 credits per cow per year or 8,750 credits/yr Carbon price Voluntary $4.00 Pre-Compliance $8.50 Compliance $15.00 Average Annual Net Revenue $25,000 $64,000 $120,000 Net Present Value (10 years, 7%) $163,000 $440,000 $840,000 % of Capital Cost (~ $2.1 million) 8% 20% 40%
- 19. Net Carbon Revenue = Credits x Carbon Price - Transaction Costs
- 20. Transaction Costs 1. Meters 2. Monitoring 3. Registry fees 4. Verification- $8,500 every 12- 24 months
- 21. Renewable Energy Certificates Renewable Identification Number Nutrient Management Carbon Credits Methane Avoidance Carbon Credits
- 22. How to receive credits for a practice 1. Project developer prepares project development plan 2. Register the project with a standard body under a specific methodology 3. Third party validation and verification process to ensure the project will “additionally” reduce/sequester GHG emissions, not cause “leakage”, be “additional” and “permanent” 4. Be periodically monitored and credited
- 23. Credits Received – then what? • Credits can then be sold • Credits are only worth what the market is willing to pay for them • Dependent on market demand from a compliance buyer or have a voluntary buyer
- 24. Key takeaways: • Carbon projects work best when they fit overall land management goals. • Carbon projects need to make business sense: • Identifying a buyer willing to make a contractual commitment to purchase offsets at volume and terms sufficient to cover the costs of developing and maintaining the project is critical
- 25. For more information: Tkoper@climatetrust.org 503-238-1915 x214 www.climatetrust.org
Editor's Notes
- The Climate Trust is a 501c(3) nonprofit organization with over 16 years of carbon financing experience. Our mission is to provide expertise, financing, and inspiration to accelerate innovative climate solutions that endure. In order to arrest the rise in greenhouse gas emissions and to avoid the most dangerous impacts of climate change, TCT works to accelerate project implementation, develop financing solutions, and establish a supportive policy environment in the renewable energy, agricultural, forestry and energy efficiency sectors. Additional information at www.climatetrust.org
- The Infamous Dust Bowl was a great teacher! Paint the picture…Story dust bowl Dust covered everything, it was the top soil – the life blood of our farms, The Dust Bowl taught us that conservation management is essential – land can be over-grazed and over-tilled Soil Conservation Service – Now Natural Resources Conservation Service – effectively assisted farmers/ranchers to voluntarily implement conservation practices While this was very effective, We are now experiencing ever-increasing and unpredictable weather extremes, abnormalities and frequency Critical to continue and expand conservation efforts It is key to continue to conserve and protect precious resources, such as soil fertility, water, air, and natural ecosystems land conservation is a tool that has tremendous potential for climate solutions -- Next: Air, water, soil are beginning to valued economically and landowners/producers may be in a position to benefit
- Landowners/Producers can benefit financially by earning environmental credits (carbon credits are one type) Co-Benefits: for example, No-Till practices have the potential build soil fertility and resilience, while also improving water quality Mitigate climate imbalances by reducing or sequestering GHG Also, assisting other sectors by offsetting a portion of their emissions (meet compliance) Tool for Aiding Landowners:
- Carbon Markets are a way of taking corrective action to address climate imbalance through economic solutions Bullet Intent - Initiates action through monetary incentives for innovation practice adopters, while improving and adapting (learning opportunities) This drives Methodology Development enabling sound standards for Implementing Practices Why we call it the Carbon Markets, when there are many other greenhouse gases besides Carbon Dioxide (such as methane and nitrous oxide, etc.) Comparing apples to apples GHG each differ in potency and longevity in the atmosphere Carbon Dioxide has been adapted as Standard Term (most common GHG resulting from human activities): CO2 MT equivalent is the customary term
- Drivers Corporate Social Responsibility (CSR) (self-regulating) + branding Compliance
- Provide credible standards for reducing/sequestering GHG, issuing credits and credit registries (a way of accounting for registered and completed projects)
- Example – Deforestation, Reforestation, commit to (terms of the Standards) 100 years, not cause more cutting elsewhere (must be avoided and accounted for) Commitments Landowner/Producer agree to adhere to – initial and transaction costs, adhering to standard (practice change, verification/validation, monitoring) --- Next, give brief overview of the types of practices by sector that are currently eligible for Carbon Credits
- Allowable practices through the standards are generally referred to as Methodologies/Protocols Ever changing – moving and complex Researching and monitoring for improvements and increased understanding Promoting land resilience and adaptabilility
- Disturbing soil – releases greenhouse gases in an instant that would otherwise have remained naturally sequestered long term Once the soil-life has been disrupted – balance and productivity take time and the right set of conditions to redevelop – Example - No-till pracitces – once initiated takes years to increase soil productivity and hence crop yield, but once it does, it is so much more resilient in the longterm, such as increased water holding capacity (ability to better withstand droughts) Hence - Carbon sequestration offers tremendous potential as a the solution to Climate Change
- Expiring CRP land – Grazing Potential Carbon Potential The Farm Bill was approved by the Senate yesterday, with it come severe cuts Conservation Reserve Program, This means CRP land will be expiring and landowners will be in a position to till the land that has been resting for 10-15 years. The Avoided Conversion – Potential for Carbon Credits provide revenue to keep this undisturbed land intact.
- Whole Farm and Ranch “carbon footprint” assessment tool. Guide you through describing your farm or ranch management practices including alternative future management scenarios. Free assessment tool
- Significant Difference between rules of what is eligible and calculated offset volumes under different methods and standards.
- Note that…
- Biocarbon is biomass in its broadest definition – includes carbon in natural systems, but also offers solutions including biofuels and carbon sequestration Biochar Production – carbon credits (methodology in progress) Biofuels can be a source of fuel (energy and/or heat or extra revenue) for the producer
- Different organic feedstocks, such as…. can be digested or combusted for various uses, such as…
- Projects frequently use both
- Each project and climate friendly practice is different General rules of thumb for each, this is one example to provide general revenue estimates Prices vary Each type of practice has its different costs (development/construction, registration, verification and validation, monitoring) and other variable such as size of project, etc.
- Each project type has different transaction cost Digestion cost example might include -
- Additional sources of revenue for methane avoidance carbon credits includes: electricity/heat, biofuel, biochar, fertilizer, livestock bedding (and the list may continue to grow)
- Project developer prepares a project development plan (document) Register the project with a standard body (ACR, CAR, VCS) under a specific methodology, such as Avoided Conversion of Grasslands/Shrublands Then the project must go through a third party validation and verification process to ensure the project will reduce/sequester GHG emissions, not cause “leakage”, be “additional” and “permanence.” Depending on the requirements of the methodology, the project will be periodically monitored and credited.
- Credits can then be sold Credits are only worth what the market is willing to pay for them There must be demand from a compliance buyer (such as is created the CA Cap and Trade system) or have a voluntary buyer Prices tend to be higher in the compliance market and this is why CA is one of the most impactful drivers of the Carbon Markets right now.
- Counting on farmers, to provide under these extreme circumstances and hold the key to the solution We all depend on this planet for life Voluntarily participate, lead the way, take advantage of incentives to build resilience, don’t wait to be regulated Call for action – get in the action, lead the way, landowners hold the key to resilience into the future. Change is inevitable, resilience is key, Incentives are there, so I encourage you to explore potential solutions and then take steps in preparation for the future.