Iowa Farm Bureau Carbon Credit Aggregation

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Iowa Farm BureauCarbon Credit Aggregation
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(No Transcript)
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Topics to be Covered

• What is Carbon Sequestration?
• Background on the Chicago Climate Exchange
• Exchange Offsets
• Exchange Offset Sales Contracts

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Greenhouse Gases

• Carbon Dioxide (CO2)
• Methane (CH4)
• Nitrous Oxide (N2O)
• Sulfur Hexafluoride (SF6)
• Perfluorocarbons (PFCs)
• Hydrofluorocarbons (HFCs)

• 6.9 billion metric tons CO2e total
• 545 million metric tons from CH4
• 40 million metric tons from manure management
  alone

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What is carbon sequestration?

• Transformation of atmospheric carbon to a
  fixed-state carbon. Land-based carbon
  sequestration is typically done through
• Forestry
• Increased Soil Organic Matter (SOM)
• Reduced tillage
• Grass plantings

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SOIL CARBON DYNAMICS IN RESPONSE TO TILLAGE

• SOIL CARBON ( OF ORIGINIAL) IN RESPONSE TO
  CULTIVATION

100
PERENNIAL VEGETATION
PLOWING
CONSERVATION TILLAGE
SOIL CARBON
50
0
1 50
years
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HOW OUR LAND IS USED
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What are Carbon Credits?

• Carbon credits encompass two ideas
• (1) Prevention/reduction of carbon emissions
  produced by human activities from reaching the
  atmosphere by capturing and diverting them to
  secure storage.
• (2) Removal of carbon from the atmosphere by
  various means and securely storing it.

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Carbon Credit Program
Greenhouse Gas Emission Reductions
Achieved via qualifying GHGemission reduction
projects

• Carbon Credit Program
• Eligibility Assessment
• Protocol Development
• Monitoring
• Reporting
• Verification
• Registration

Chicago Climate Exchange, EPA, state or UN
(Kyoto) Protocols
Carbon Credits (certified, tradable, )
Trade, bank, orsell through CCX, ECX, or direct
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The Chicago Climate Exchange

• Phase 1 Pilot Project 2003 - 2006
• Phase 2 Pilot Project 2006 - 2010

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The Chicago Climate Exchange

• The Chicago Climate Exchange (CCX) is a
  greenhouse gas (GHG) emission reduction and
  trading pilot program for emission sources and
  offset projects in the United States and for
  offset projects undertaken in Brazil. CCX is a
  self-regulatory, rules-based exchange designed
  and governed by CCX Members.
• These members have made a voluntary, legally
  binding commitment to reduce their emissions of
  greenhouse gases by four percent below the
  average of their 1998-2001 baseline by 2006, the
  last year of the first phase of the pilot
  program.

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CCX Reduction Timetable

• 2003-2006 Reduce emissions to 1, 2, 3, 4
  below 1998-2001 baseline
• 2006 2010 Reduce emissions to 6 below 98-01
  baseline

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Meeting CCX Reductions

• Allowances (x less than baseline)
• Own reductions
• Industry credits from excess reductions
• Offsets (no more than 50 of reduction
  requirement)
• Industry
• Agriculture
• No-till
• Rangeland Improvement
• Ag Methane
• Forestry

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XSO Eligible Land

• Land must be in the eligible project area
• Land must be capable of being cropped
• Must be farmed with no-till, strip till or ridge
  till practices
• Crop land can be in hay, but if row-cropped must
  be done in compliant manner
• Crop land that was recently converted to
  permanent grass (after Jan 1, 1999)

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Exchange Soil Offsets (XSOs)

• Commitment to 5 years of conservation tillage
• Annual certification of compliance
• Credits transferred to FB on Jan 1
• 20 reserve held until end of pilot project
• Transfer price will be the price as determined by
  sale through CCX less a 10 service fee.

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Documentation For CCX Ag sector offsets

• Enrollment form information
• legal description of acreage, practice(s)
  employed
• FSA maps and crop report (CCC-578)
• lessees reasonable expectation that acres are
  under control though 2010.
• Failure to keep land in compliance throughout the
  pilot program voids all credits on non-compliant
  land during the pilot program.
• Submit annual signed attestation to aggregator
• acknowledge that CCX verifiers will be given
  access to fields and CCX documents

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Definition of Conservation Tillage

• For CCX purposes these practices are as defined
  in the Natural Resources Conservation Service
  National Handbook of Conservation Practices.
• No-till/Strip-till - Managing the amount,
  orientation, and distribution of crop and other
  plant residue on the surface year-round while
  growing crops in narrow slots or tilled or
  residue-free strips in soil previously untilled
  by full width inversion implements
• Ridge-till - Managing the amount, orientation,
  and distribution of crop and other plant residue
  on the soil surface year-round while growing
  crops on preformed ridges alternated with furrows
  protected by crop residue.

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Tillage Equipment

• Full width inversion
• Moldboard plow
• Chisel plow
• Field cultivator
• Tandem disk
• Offset disk
• Row crop cultivator (except ridge till)

• Okay to use
• No-till/ridge-till planter
• No-till drill
• Rolling harrow
• Tools with wide knives
• Subsoiler/ripper
• Anhydrous applicator
• Manure knife applicator
• Ridge till cultivator

• General Guideline After the implement has been
  through the field, there must still be a
  substantial amount of surface residue present and
  the soil disturbance must not be full width. If
  use of the implement would require that a
  leveling or smoothing activity follow, it would
  probably result in too much soil disturbance.

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UCurrent Region for CCX Soil Offsetssets
Offsets for no-till or grassesOffsets for
grasses only
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Rangeland Zones
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Rangeland Credit Rates
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Proposed Soil Credit Zones

• A, C, D, E,U N/A
• G(South), N(West), I 0.20 (Irrigated
  0.5)
• T 0.25
• G(North), H, J, R 0.3 (Irrigated
  0.5)
• B, F, K, N(East), P, S 0.4 (Irrigated 0.5)
• L, M, O selected MLRAs in H, K, N(East) 0.5
• B,F,G,H,I, J, K, L, M, N, O, P, R, S, T (New
  Grass) 0.75

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Proposed Soil Credit Rates by Region
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Proposed LRR Boundary Descriptions

• F Areas in South Dakota lying northeast of the
  Missouri River All of North Dakota areas in
  Montana lying north of the Missouri River and
  east of I-15.
• G (North) Northwest Nebraska bounded by
  I-80/I-76 on the south and the counties of
  Lincoln, Logan Wheeler, Holt, Knox on the east
  Areas in South Dakota lying southwest of the
  Missouri River Areas in Wyoming lying east of
  I-25 and Areas in Montana lying south of the
  Missouri River and east of I-15.
• G (South) Areas in Colorado lying east of I-25
  and areas in New Mexico lying east of I-25 north
  of I-40 and areas east of US Route 285 south of
  I-40.
• H J Areas in Nebraska bounded by I-80/I-76 on
  the north and the counties of Lincoln, Gosper
  Webster on the east Areas of Kansas west of
  Cowley, Butler, Harvey, Rice, Ellsworth, Lincoln,
  Cloud Republic counties Areas in Oklahoma west
  of I-35 Areas of Texas west of I-35 and north of
  I-10.
• I Areas in Texas west of I-35 and South of I-10
• K Areas of Minnesota and Wisconsin north of I-94
• L M O (Existing Zone A of the CCX, along
  with selected MLRAs from areas H, K N(east))
• N (West) the Ozark areas of Missouri, Arkansas
  and Oklahoma.
• N (East) Areas of Kentucky not in CCX Zone A
  Areas of Tennessee east of I-65 Areas of Alabama
  north of US Route 78 Areas of Georgia north of
  US Route 78 and west of US Route 19 Areas of
  North Carolina west of US Route 19 Areas of
  Virginia west of US Route 19 All of West
  Virginia Areas of southeastern Ohio bounded on
  the west by US Route 23 (south of I-70 and I-71
  north of I-70 and bounded on the north by US
  Route 30 Areas of Pennsylvania south of I-80 and
  west of US Route 220 and north of I-80 and west
  of US Route 15 all of West Virginia.
• P Areas east of US Route 19 and west of I-95 in
  VA, NC Areas west of I-95 in SC Areas of GA
  south of US Route 78 and east of US Route 19 and
  west of I-95 Areas of AL south of US Route 78
  and North of I-10 Areas of FL west of I-95 and
  north of I-10, MS, Areas of Tennessee west of
  I-65, LA, TX)
• R All of New York, Vermont, New Hampshire,
  Maine, Massachusetts, Rhode Island, and
  Connecticut.
• S Areas of Pennsylvania east of US Route 15 and
  north of I-80 and areas of Pennsylvania east of
  US Route 220 south of I-80 areas of New Jersey
  and Maryland west of I-95.
• T Coastal Plain areas east of I-95 in MD, DE,
  VA, NC, SC, GA Areas of FL north of Gainesville
  Areas south of I-10 in AL, MS, LA areas of TX
  east of US Route 77

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Pool 1-3 Statistics
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Carbon Offset Prices2004 - 2006
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Price forecasts for US carbon credits
Figure 1. Projected price curves for US carbon
credits (US per metric ton).
Sources Carbon Finance, August 2004 EIA/DOE
2004. Analysis of S. 1844, the Clear Skies Act of
2003 S. 843, the Clean Air Planning Act of 2003
and S. 366, the Clean Power Act of 2003. Energy
Information Administration, USDOE,
SR/OIAF/2004-05, May 2004 EIA/DOE 2005.
Impacts of Modeled Recommendations of the
National Commission on Energy Policy. Energy
Information Administration, USDOE,
SR/OIAF/2005-02, April 2005 AEP 2004. An
assessment of AEPs actions to mitigate the
economic impacts of emissions policies. American
Electric Power, August 31 2004
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Rangeland Project Eligibility

• Land meets CCX definition of Rangeland
• Rangeland is in a CCX-approved area
• Project involves rangeland management practices
  that include use of all of the following tools
• Light or Moderate Stocking rates
• Sustainable Livestock Distribution

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Rangeland Protocol

• The Natural Resources Conservation Service (NRCS)
  Field Office Technical Guides publish guidelines
  for managing the controlled harvest of vegetation
  with grazing animals.
• Stocking rates and livestock distribution
  criteria are defined according to County and
  State in the NRCS Prescribed Grazing
  Specification code.

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Rangeland Areas
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Forestry Offsets

• Eligible Projects
• Planting and/or natural regeneration after Jan 1,
  1990 on land not forested on Dec 31, 1989.
• Working forest lands projects
• Credits based on net annual increase in carbon
  stocks (CO2 equivalents) during 2003-2010.
• Long-term commitment
• Evidence that the carbon stocks in forest parcels
  will be subject to long-term maintenance in a
  manner deemed acceptable by CCX Offset Committee
  (easement, contract, etc.)

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Forestry Offsets Contd

• XFOs will be issued based on annual increases in
  above-ground living biomass.
• Forestation projects are subject to verification
  by CCX approved verifiers.
• Small medium forestry can used CCX tabled
  quantities.

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Methane Offsets

• Ag Methane destruction projects that were put
  into place after Jan 1, 1999.
• Dairy
• Swine
• Eligibility
• Liquid slurry storage
• Pit storage below animals (gt 1 month)
• Uncovered anaerobic lagoons

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Credit Calculation

• Baseline Calculation -- The lower of
• (a) Actual monitored amount of methane captured
  and destroyed by the project activity (using
  existing CCX monitoring protocols but with full
  GWP for methane). The default methane combustion
  efficiency for flared biogas from anaerobic
  digesters is 90. Higher efficiencies may be used
  if supported by manufacturers specifications or
  other acceptable data. The default methane
  combustion efficiency for biogas utilized by
  electricity gensets is 100.
• (b) The methane emission calculated ex ante based
  on the amount of the animal manure that would
  decay anaerobically in the absence of the project
  activity, using the most recent country-specific
  IPCC tier 2 approach (for a description of the
  proposed calculation methods for projects in the
  U.S., see Appendix B).

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Ex Ante Calculation of Baseline Methane

• Appendix B Ex Ante Calculations of Baseline
  Methane Emissions for U.S. Manure Digester
  Projects
• 1. Characterize the average livestock populations
  included in the anaerobic digester project for
  the reporting period
• 2. Characterize the baseline manure management
  system for the project
• 3. For each livestock population category and
  baseline manure management system, multiply the
  number of animals by the appropriate emission
  factor for that state (from Tables B.2 and B.3),
  by the appropriate solids separation correction
  factor, by the proportion of manure from those
  animals used in the digester, by the number of
  days in the period (Equation 1)
• 4. Sum the estimates for all population
  categories and baseline manure management systems
  (Equation 1)
• 5. Multiply the total estimate of methane
  emission by the appropriate methane GWP for the
  reporting period (Equation 2).

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Baseline Credit Rates - Iowa
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Mechanics of Ag Offset Aggregation in CCX

• CCX
• issues offsets to aggregators registry account
• commissions verifiers

documentation
offsets

• Aggregators
• accepts initial registrations from producers
• assembles annual attestations of activities from
  producers
• receives offsets into CCX registry account from
• executes sales on CCX trading platform on behalf
  of growers
• manage multi-grower reserve account

documentation
sales proceeds
Individual Growers - register undertake actions
as per 4-year contract sign annual attestations
allow access to CCX verifiers ultimate owner of
offsets
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Mechanics of Trading

• CCX Registry

• CCX Trading Floor

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Contact Information

• David Miller
• Director, Commodity Services
• Iowa Farm Bureau
• 5400 University Ave
• West Des Moines, IA 50266
• www.iowafarmbureau.com/carbon
• Ph 515-225-5431
• E-mail damiller_at_ifbf.org