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KFB facilitates carbon credit planBy Larry Dreiling Kansas producers interested in marketing environmental credits for the conservation work they do on their land now have an opportunity to do so through a contract facilitator of Kansas Farm Bureau. Steve Swaffar, KFB director of natural resources, has been traveling the state lately, hosting informational meetings on how farmers and ranchers can earn income from no-till and strip-till production, new grass plantings and rangeland management. Swaffar held one such meeting recently at Hays. About 15 producers attended to hear Swaffar's discussion on this new market. "Our role at Kansas Farm Bureau is to be a contract facilitator, provide information and education to producers, answer their questions on the program and on carbon credits, to sign them up for this program and then to work with our aggregator to enroll those credits," Swaffar said. The aggregator is AgraGate Climate Credits Corp., a new entity for carbon credit aggregation owned by Iowa Farm Bureau Federation. Launched in July 2007, AgraGate is the first licensed aggregator on the Chicago Climate Exchange, which was founded in 2003. Enrolling producers AgraGate has four aggregation specialists on staff, building a nationwide network of contract facilitators. So far, 3.4 million carbon credits have been enrolled, constituting 1.5 million acres enrolled in 25 states. "AgraGate's mission is to be the 'Country Elevator of Carbon Credits,'" Swaffar said, "with the objective to enable businesses, farmers, ranchers, and land owners to capitalize on financial opportunities available in the environmental credit market. AgraGate's role is to provide farmers, ranchers, and land owners with information on opportunities available for earning marketable environmental credits." Swaffar then gave attendees a brief summation of legislation designed to reduce greenhouse gases, primarily 6.9 billion metric tonnes of carbon dioxide and 545 million metric tonnes of methane (40 million of which are emitted from manure management) that are emitted. "These temperature-regulating gases form a blanket around the earth that traps some heat from the sun within the earth's atmosphere, keeping the planet warm and habitable. The greenhouse effect refers to the temperature regulation effect that certain atmospheric gases have on the earth," Swaffar said. "In the 109th U.S. Congress there have been no less than seven proposals to reduce these emissions. They include the use of market-based, cap-and-trade mechanisms and specified emission caps. There are different formulas and time frames. The Bush administration policy is to have an emissions intensity target, which is a business as usual scenario." Market driven Leave it to markets to develop a way to reduce these gases through carbon credit markets. "A carbon credit is equivalent to one metric ton of CO2. You can get a carbon credit through what's called an Exchange Soil Offset or Soil Carbon Credit," Swaffar said. "In Kansas, you'd get anywhere from 0.2 to 0.6 carbon credits per acre per year for continuous no-till and strip-till. "You can get a full credit per acre per year for new grass seedings after Jan. 1, 1999." Carbon credits encompass two ideas, Swaffar said: --Prevention/reduction of carbon emissions produced by human activities from reaching the atmosphere by capturing and diverting them to secure storage. --Removal of carbon from the atmosphere by various means and securely storing it. This is better known as carbon sequestration, the capture and secure storage of carbon that would otherwise be emitted to or remain in the atmosphere. In time, it was determined to develop a carbon credit market, through a centralized exchange, where credits would be purchased on the exchange by emitters. They would be sold by emitters, too, but they would also be sold by offset providers, often through aggregators that would assist sellers in offering the offset credits. Self-regulatory system Thus, the Chicago Climate Exchange was born. "The Chicago Climate Exchange, or CCX, is a greenhouse gas emission reduction and trading pilot program for emission sources and offset projects in the United States and for offset projects undertaken in Brazil and other countries. CCX is a self-regulatory, rules-based exchange designed and governed by CCX members," Swaffar said. "These members made a voluntary, legally binding commitment to reduce their emissions of greenhouse gases by 4 percent below the average of their 1998-2001 baseline by 2006 and a 6 percent reduction by 2010. CCX founding members included American Electric Power, Ford Motor Co., Baxter, DuPont, Waste Management Inc., International Paper, Motorola and the City of Chicago. All told, the CCX has more than 380 members, including around 100 emitter members such as agribusinesses Agrium, Bayer Corp., Cargill, Monsanto and Smithfield Foods. Seven municipalities and seven universities also are members. In 2004, the CCX issued barely 100,000 offsets. Through September 2007, the exchange issued over 17.5 million offsets. Members can meet CCX reduction commitments through their own reductions or by purchasing industry credits from excess reductions. These offsets can be no more than 50 percent of their reduction requirements. No-till a winner That opens the door for producers to offer offsets from their no-till, from new grass, rangeland and forestry, from agricultural methane and renewable energy. "Use of plows have diminished as conservation tillage and perennial vegetation has increased, making farmers and ranchers good candidates for enrolling credits. In the CCX offset portfolio, about 42 percent of the offsets come from agricultural soil," Swaffar said. "This offsets the 38 that comes from coal mines." As a general guideline for land to be eligible for carbon credits, after an 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. This is better known as the "two-thirds" rule. No credits can be earned during a year if residue is removed, such as baling corn stocks, chopping silage, burning grass, unless a cover crop is planted after the removal. There is 3 percent variance factor for fixing washouts, ruts, tiling and the like. Offset types Swaffar detailed two types of CCX offsets, soil offsets and rangeland offsets. Soil offsets run for five to six-year contracts for production under conservation tillage and new grass acres. New grass acres can extend back to 2003 with an approved CRP contract. There must be an annual certification of compliance through AgraGate. With the credits transferred to AgraGate each Jan. 1. The transfer price of the credit will be the price as determined by sale through the CCX less a 10 percent service fee. Rangeland offsets are eligible for CCX-approved areas, primarily the western two-thirds of Kansas for land that uses rangeland management practices that include use of all of the following tools: --Light or moderate stocking rates, --Sustainable livestock distribution, --Drought mitigation. While he did not detail them, Swaffar also said credits for forests and for trapping methane at certain types of confined animal feeding operations also are available. For further information, contact Swaffar at Kansas Farm Bureau, telephone 1-888-811-0002 or e-mail him at swaffars@kfb.org. Larry Dreiling can be reached by phone at 785-628-1117 or by e-mail at ldreiling@aol.com. 3/10/08 Date: 3/6/08
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