A compliance-based carbon trading market is not currently established in Canada (April 2007). However, Alberta is the first province to have legislation in place to reduce Greenhouse Gas (GHG) emissions from large companies. This legislation, Climate Change and Emissions Management Amendment Act regulates emissions starting July 1, 2007. Once the regulations and a system of verifying carbon credits are in place, carbon trading between emitters and farmers who sequester carbon will likely occur on a regular basis in Alberta.

Until the regulations, verification system, and markets are in place, Alberta Agriculture and Food does not have a formal position on carbon trading. The decision to contract with a private aggregator for the sale of carbon credits in the existing voluntary market is an individual choice. Alberta Agriculture and Food encourages farmers, considering a sales contract for carbon credits, to make themselves aware of the terms of the contract and their obligations according to the contract. Farmers are also encouraged to learn as much as they can about soil as a carbon sink and the issues surrounding carbon trading in Canada.

What are some of the changes that the Climate Change and Emissions Management Amendment Act will introduce?
Starting July 1, 2007, companies that emit more than 100,000 tonnes of greenhouse gasses a year must reduce their emissions by 12 per cent. If companies are unable to meet this target, they will be required to invest $15 per tonne of emissions above the 12 per cent reduction target, into an Alberta-based technology fund. Alternatively, companies can invest in Albert-based offset projects outside of their operations. Some agricultural land management systems are expected to qualify as carbon offset projects in Alberta.

Alberta is in the process of completing documents that will support Alberta’s Compliance Carbon Offset Market. Alberta is planning to have an offset trust up and running by the end of summer 2007. Prior to purchase, the offset reductions offered by an operation will have to be verified by a third party to ensure the emission reductions are real.

Alberta legislation to reduce greenhouse gasses News Release

Why would a company voluntarily contract to buy carbon offsets that are not required by law?
There may be many reasons why a corporation would voluntarily purchase carbon credits but primarily they “buy them as an investment or hedge in anticipation of forthcoming emissions mandates¹". Current purchasers of carbon credits are protecting themselves against future price increases that could happen if or when the regulatory environment changes.

What is sequestered carbon worth?
Without a compliance-based market it is difficult to say what carbon is worth. When investigating a potential contract, keep in mind that the penalty for CO2 over-emission in Alberta will be $15 per tonne of carbon dioxide equivalence (CO2e) and a pilot project sponsored by the Saskatchewan Soil Conservation Association valued CO2 at about $11 per tonne, to have some frame of reference of what CO2e could be worth in a compliance-based marketplace. In voluntary markets carbon offsets trade at values considerably lower than in compliance markets. For example, at closing on March 30, 2007, CO2 was trading on the Chicago Climate Exchange for about US$3.50 per ton.

Where can I find more information?
Carbon Credits and the State of Play of North American Carbon covers some of the basic issues related to carbon markets and carbon trading in North America. This document explains the differences between voluntary-based and compliance-based carbon markets and includes questions that farmers should ask prior to contracting to sell carbon.

Carbon Credits and the State of Play of North American Carbon

The Saskatchewan Soil Conservation Association (SSCA) has a long history of supporting farmers’ rights to benefit from their conservation farming practices. The SSCA website has a legal opinion about a past carbon trading contract (2003-2006) on the opening page and a Soil Carbon Sinks section that has good general information on carbon sequestration and carbon trading.

Saskatchewan Soil Conservation Association

The Alberta Conservation Tillage Society is a partner in a pilot carbon trading project. Discoveries from this pilot project could form the basis of future carbon trades between carbon emitters and zero-till farmers in Canada.

Pilot Carbon Trading Project

Flatlander Environmental Services and C-Green Aggregators have been actively involved in contracting with farmers for the sale of carbon on the Chicago Climate Exchange. Both companies have information about their current contracts and frequently asked questions on their websites.

Flatlander Environmental Services

C-Green Aggregators

¹C-Green Aggregators, Frequently Asked Questions.
www.c-green.ca/Carbon_Credit_Question_and_Answer_Sheet.pdf

Prepared by Doon Pauly, Ag-Info Centre, Agriculture & Rural Development

Trading Carbon Credits From Direct Seeded Farmland - Frequently Asked Questions

The contents of this page are no longer available.

For more information about the content of this document, contact Doon Pauly.
This document is maintained by Brenda McLellan.
This information published to the web on April 3, 2007.
Last Reviewed/Revised on September 5, 2008.