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Carbon credits and the state of play of North American carbon markets – Part II


March 9, 2008
By Karen Haugen-Kozyra

Topics

Global trade in carbon is a
growing business. According to the World Bank, international carbon
sales quadrupled in 2006 to more than $25
billion.

Global trade in carbon is a growing business. According to the World Bank, international carbon sales quadrupled in 2006 to more than $25
billion. In North America, a patchwork quilt of voluntary and regulated
carbon markets is emerging, causing a lot of confusion for buyers and
sellers as to ‘what counts’ in these developing markets.

In the first installment of her column, Haugen-Kozyra provided a
basic overview of the carbon credit market in North America. Now she
will provide a closer look at a compliance-based market.

The Alberta carbon market – Compliance-based
It is important to know from the outset that any project-based carbon offset market, whether voluntary or compliance-based, involves a number of steps to deliver saleable offsets to market:
• Demonstrate best available science
has been used to quantify the
tons of GHGs reduced by a practice change or new technology (fits the
‘real’ and quantifiable rules for
the market);
• Ensure the project is eligible under the particular market – guidance or market standards are typically issued by the government or program administrator;
• Implement the project by changing practices or installing the technology – data and information management
are key for reporting activity and enabling verification;
• Verify GHG reductions achieved by the project – usually requires hiring third party auditors to give buyers confidence in the stated reductions;
• Certify amount of carbon offsets in the form of a credit (or compliance unit) – in a compliance-based market the government typically needs to be involved to provide assurance to the buyers;
• Deliver GHG offset credits for sale on the carbon market.
These steps, in the context of the above rules in the Alberta regulations, leave a number of questions in the minds of buyers and sellers:
• How will I know what activities or technologies count when thinking about a contract for carbon credits?
• How do I know how many tons of emission reductions (or in the case of soil sinks – removals) can be created with these changes in practice or technology?
• Where do I find the ‘best available science’ for quantifying these offsets?
• If I was reduced tilling before 2002, or have trees on my farm already, will I have anything to sell?
• How long do I have to maintain the practice or technology in order to
gain credit?
• Where do I find these qualified third party auditors and how much do they cost? How often will they come to my farm to check out what I’m doing?
• What kinds of records and data do I have to keep and in what format?
• What happens if I have to till to control weeds, or what happens if my woodlot burns down, and I’m under contract?
• Will I require a legal easement on my property if I enter into a contract?
• What is the current price for a ton of carbon?
• Where do I go to find more information?

To answer some or most of these questions, the Alberta Government
and Climate Change Central will be launching Carbon Solutions – an information and market support program that will provide the necessary infrastructure and market tools to facilitate carbon market offset projects in Alberta. Carbon Solutions aims to reduce transaction costs and minimize risk for project-based offsets in Alberta.

Carbon Solutions will have available market guidance materials
on how to get started, as well as other necessary information on things like baseline practices, crediting periods and project registries. Plus, to give buyers and sellers confidence in the market, more than 13 market standards that quantify the amount of credits eligible for sale in Alberta
will be available on Climate Change Central’s website, www.climatechangecentral.com.

For the agriculture sector, these standards cover activities cross a wide range of activities and sub-sectors: pork operations, beef operations, composting, soil management, biofuels, bio-gas (anaerobic digestion), biomass combustion, energy efficiency, waste heat recovery, as
well as others for other sector’s activities as well.

They have been developed with the best available science for Canadian conditions and been reviewed by experts in each field. Further, they are based on International Standards and are designed to be compatible with an eventual national market and other compliance-based market requirements, enabling even greater opportunities for Alberta buyers and sellers in the future.

In the July/August issue of Manure Manager, Haugen-Kozyra provided a look at ‘The state of play’ in North American carbon markets.
This column will conclude with Part III in the November/December issue of Manure Manager.

Karen Haugen-Kozyra is the acting director of policy development and offset solutions with Climate Change Central, a public-private partnership in Alberta that promotes the development of innovative responses to global climate change and its impacts. Climate Change Central builds links and relationships between businesses, governments and other stakeholders in Alberta interested in pursuing greenhouse gas reduction initiatives.