For more than a decade, the potential to earn revenue from climate-saving activities in agriculture has been touted throughout farm-related industries. This presentation will assume a basic knowledge of the concept of carbon markets as a kind of ecosystem service market. The focus will instead be put on current market opportunities and the importance of learning from past mistakes. Included in the discussion will be carbon offset opportunities for methane capture from manure digesters and composting and nitrous oxide reduction from controls on nitrogen fertilization. Participants will learn about voluntary and compliance market opportunities and the value of offsets versus transactions costs in today’s markets. Sources of market information will also be discussed. http://www.extension.org/pages/67612/money-from-something:-carbon-market-developments-for-agriculture

1. Money from Something
Carbon Market Developments for
Agriculture
Jim Jensen
Sr. Bioenergy and Alternative Fuels Specialist
From Waste to Worth: “Spreading” Science and Solutions
April 3, 2013

2. Topics
• Global climate change: the recent past
• Ecosystem market approaches
• Utility-based valuation
• Voluntary carbon markets
• Compliance carbon markets
• Current economics for ag methane
• Conclusions

3. Climate Change – 2000s
Science Coverage Media Coverage

4. Carbon Markets Develop
Chicago Climate
Exchange
RIP 2004-2010
Chicago Climate
Exchange
RIP 2004-2010

5. Key Greenhouse Gases (GHGs)
Carbon dioxide (CO2)
Methane (CH4)
Nitrous Oxide (N2O)
Perfluorocarbons (PFCs)
Hydrofluorocarbons (HFCs)
Sulfur hexafluoride (SF6)

6. Key Greenhouse Gases (GHGs)
Carbon dioxide (CO2)
Methane (CH4)
Nitrous Oxide (N2O)
Perfluorocarbons (PFCs)
Hydrofluorocarbons (HFCs)
Sulfur hexafluoride (SF6)
USDA, 2004

7. Key Greenhouse Gases (GHGs)
Carbon dioxide (CO2)
Methane (CH4)
Nitrous Oxide (N2O)
Perfluorocarbons (PFCs)
Hydrofluorocarbons (HFCs)
Sulfur hexafluoride (SF6)
USDA, 2004

8. GHG Reductions Have Value
Types of Ecosystem Service Markets

9. GHG Reductions Have Value
Types of Ecosystem Service Markets
•Conservation Reserve Program (CRP)
•Renewable Energy Credits (RECs)

10. GHG Reductions Have Value
Types of Ecosystem Service Markets
•Conservation Reserve Program (CRP)
•Renewable Energy Credits (RECs)
•SOX & NOX – the original cap-and-trade
•Carbon Credits – from GHG reductions,
avoidance, or sequestration

11. GHG Reductions Have Value
Types of Ecosystem Service Markets
•Conservation Reserve Program (CRP)
•Renewable Energy Credits (RECs)
•SOX & NOX – the original cap-and-trade
•Carbon Credits – from GHG reductions,
avoidance, or sequestration
Ways to Capture Carbon Value
1. Utility-based purchases
2. Voluntary carbon markets
3. Compliance carbon markets

12. Utility-Based Purchases
• Green power/green gas collections from customers
• Standard offer contracts (feed-in tariffs)
• Examples: Wisconsin, Vermont, North Carolina

13. Utility-Based Purchases
Vermont SPEED
Hydro, solar PV, wind, biomass, landfill gas, farm methane
Standard Offer support for renewable power
Current: $0.14/kwh
• Green power/green gas collections from customers
• Standard offer contracts (feed-in tariffs)
• Examples: Wisconsin, Vermont, North Carolina

14. Utility-Based Purchases
Vermont Cow Power
• Collects $0.04/kWh from
customers for “Cow Power”
• Includes CO2 and CH4
reduction benefits
• $3.5 mil paid to
participating farms in 8 yrs
• Green power/green gas collections from customers
• Standard offer contracts (feed-in tariffs)
• Examples: Wisconsin, Vermont, North Carolina

15. Utility-Based Purchases
Vermont SPEED
• Standard Offer for
renewable power
• Hydro, solar PV, wind,
biomass, landfill gas, farm
methane
• Current: $0.14/kwh
Vermont Cow Power
• Collects $0.04/kWh from
customers for “Cow Power”
• Includes CO2 and CH4
reduction benefits
• $ passed to participating
farms as long as available
• Green power/green gas collections from customers
• Standard offer contracts (feed-in tariffs)
• Examples: Wisconsin, Vermont, North Carolina
Cow Power
in British Columbia
•Utility (BC Hydro) pays $0.10/kWh for renewable
electricity (any kind)
•Cost to produce farm methane power is closer to
$0.14
•Cow Power enlists business and individual
subscribers to pay $0.04/kWh to support farm
projects
•Includes GHG benefit of methane reductions

16. Carbon Markets Today
VOLUNTARY COMPLIANCE

17. Carbon Markets Today
VOLUNTARY
• Offsets based on existing
protocols/registries
• Verification patterns vary
• Private transactions retire
offsets
• Business to Business (or
individual)
• Carbon Funds
COMPLIANCE

18. Carbon Markets Today
VOLUNTARY
• Offsets based on existing
protocols/registries
• Verification patterns vary
• Private transactions retire
offsets
• Business to Business (or
individual)
• Carbon Funds
COMPLIANCE
• Government regulation
• Overall cap on emissions;
smaller over time
• Allowances (permits)
• Trading allowed to find
lowest cost compliance
• Offsets come from non-
regulated parties
• Offsets governed by rules,
verification, registries

19. What are Carbon Offset Credits
• Real, documented, verified results:
– Reductions of greenhouse gas emissions
– Avoidance of greenhouse gas emissions
– Increases in carbon sequestration
• Carbon Dioxide is the measure:
1 metric ton of CO2 = 1 carbon credit
• Global Warming Potential is relative:
Methane – 23 times greater
Nitrous Oxide – 300 times greater
• The process of creating offset credits
can be complex and costly.

20. Criteria for Carbon Offsets
• Measurable and verifiable
• Additionality:
– Regulatory surplus
– Timing test
– Implementation barriers (financial,
technical, institutional)
– Common practice
• Real:
– Permanence
– Leakage
• Clear ownership

21. Problem: Open-Air Lagoons (“baseline”)

22. Solution: Covered Lagoons or Digesters

23. Carbon Offset Project Steps
1. Project boundaries
2. Registry registration
3. Protocol development

24. Carbon Offset Project Steps
1. Project boundaries
2. Registry registration
3. Protocol development
4. Measuring
5. Monitoring
6. Verification

25. Carbon Offset Project Steps
1. Project boundaries
2. Registry registration
3. Protocol development
4. Measuring
5. Monitoring
6. Verification
7. Certification
8. Credit issuance
9. Credit aggregation/sale

26. • Non-profit, since 1997
• Carbon offset credits, programs, consulting
• Manage dedicated carbon offset funds
• Protocol and policy support
Offsets: biodigesters, cogeneration, building
efficiency, fuel switching, industrial efficiency,
material substitution, renewable energy, forest
sequestration, transportation efficiency

27. • Since 2000, wind and ag methane
• Carbon offset and renewable energy credits, carbon
accounting software
• Pay farm project up front or as you go
Clients

28. • Since 2004 (Univ of Penn)
• Buy and sell offset credits
• Manage offset projects
• Farm power (methane), landfill
gas, coal mine methane, wind
• Clients: individuals, families,
corporations, LEED/green
building, universities, private
aviation
• Retail price: $13.12/ metric ton
of CO2e (calculators provided)
Existing projects
have destroyed
more than
4 million
tons of CO2e

29. Compliance Carbon Markets
RGGI California – AB 32

30. Compliance Carbon Markets
RGGI
• 9 states: CT, DE, ME, MD,
MA, NH, NY, RI, and VT
• Electricity sector: 200
power plants
• U.S. short tons of CO2
• Allowances are auctioned
• Offsets are very limited
• Current allowances: ~ $2.70

31. Compliance Carbon Markets
RGGI
• 9 states: CT, DE, ME, MD,
MA, NH, NY, RI, and VT
• Electricity sector: 200
power plants
• U.S. short tons of CO2
• Allowances are auctioned
• Offsets are very limited
• Current allowances: ~ $2.70
California – AB 32
• Power and industrial sectors
(>25,000 metric tons/yr);
transportation starts in 2015
• Metric tons of CO2
• Allowances are auctioned;
minimum floor price of $10
• Offsets: livestock methane,
forestry, urban forestry, and
ozone-depleting substances
• Current allowances: ~$13.50

32. California Carbon Market
Current livestock methane projects
Climate Action Reserve
•Listed: 60
•Registered: 36
•Verified Credits: 800,000+
•Early Action Projects: 13 - transition
to compliance

33. California Carbon Market
Source: Climate Action Reserve

34. Economic Factors 2013
Est. Costs and Benefits
CA Compliance Market
• Credits per cow per year: 2 to 3

35. Economic Factors 2013
Est. Costs and Benefits
CA Compliance Market
• Credits per cow per year: 2 to 3
• Initial equip costs: $15,000+
• Annual MMV costs: $15,000+
• Transaction/partner costs: variable

36. Economic Factors 2013
Est. Costs and Benefits
CA Compliance Market
• Credits per cow per year: 2 to 3
• Initial equip costs: $15,000+
• Annual MMV costs: $15,000+
• Transaction/partner costs: variable
• Allowance prices: $13.50 - $15.00
• Offset value: lag allowance prices
by ~25%

37. Economic Factors 2013
Est. Costs and Benefits
CA Compliance Market
• Credits per cow per year: 2 to 3
• Initial equip costs: $15,000+
• Annual MMV costs: $15,000+
• Transaction/partner costs: variable
• Allowance prices: $13.50 - $15.00
• Offset value: lag allowance prices
by ~25%
• Threshold size: 1,500 cows

38. Market Risks
• Complexity
• Eligibility/timing
• Additionality/regulatory changes
• Methane destruction systems
• Monitoring systems
• Data management (gaps)
• Protocol choices/revisions
• Verification variables
• Transaction costs
• Buyers

39. Carbon Market Opportunities
Utility-based programs
Voluntary carbon markets
California compliance market
1,500 cows

40. The Cherry on Top
• Summary
• Conclusion
• Lesson Learned
• Key Takeaway
• The Bottom Line

41. Jim Jensen
Senior Bioenergy and
Alternative Fuels Specialist
360-956-2083
jensenj@energy.wsu.edu
@JJensen_WSU
www.linkedin.com/pub/jim-jensen/4/294/37
Proceedings: www.extension.org/pages/67612/money-from-
something:-carbon-market-developments-for-agriculture
Thank You