The Climate Trust is exploring the potential to generate carbon credits from changes in agricultural nutrient management practices. This work has most recently led our executive director, Sean Penrith, to Portland's sister city of Kunming in Yunnan Province. The goal of the trip was to scope the potential to harness the power of the country's new emissions trading systems to reduce agricultural runoff pollution in one of the province's major water sources, Dianchi Lake. The following presentation outlines the problem, and how carbon markets might be able to help.

1. Nitrogen fertilizer
reduction for Dianchi
Lake in China
Sean Penrith
Executive Director

2. Problem Statement
 Farming practices in Kunming are polluting Dianchi Lake
 55% of the lake's fish population has been killed off by pollution
 The lake water is rated Grade V (the worst grade) which makes the water unfit for
agricultural or industrial uses

3. Problem Statement
 Nitrogen is the key input to global agriculture and China uses over 1/3
of total nitrogen fertilizer produced
 Can be produced using either coal or natural gas; China uses mostly coal
 Less than 50% of nitrogen is absorbed by plants
 Unabsorbed nitrogen damages the environment
 Water pollution (ground and surface water)
 Air pollution (Greenhouse Gas Emissions)
 Nutrient management can help!

4. Nutrient Management Overview
Step 1: Farmers apply less
nitrogen fertilizers to their
fields
Step 2: Credits are generated from
the resulting emission reductions
Step 3: Credits can be sold
on the market and revenue
returned to the farmer

5. Practices that reduce emissions
 Reduction in application rate
 Cover cropping
 Injection into soil
 Changing type of fertilizer
 Changing timing of applications

6. Benefits of Carbon Trading
 A cleaner lake
 More revenue for farmers
 Credits to comply with ETS
 Reduce GHGs in atmosphere

7. Generation of Credits
 The process is cyclical; the successful sale of credits causes more farmers to
want to participate

8. Scale
 Depends primarily on the credits
per acre of a project
 In the US, this is very low (usually
less than 1 credit per acre)
 Therefore it is important to be
able to aggregate many fields
together to make the project
attractive to buyers

9. Data Needs
 Based on nitrogen reduction methodologies based on the US corn belt
(adaptation needed for Kunming pilot)
 Each growing season is one year of the project
 Projects need 5 years of historical data to establish a baseline condition
 Key inputs needed:
 Amount of nitrogen applied (baseline and project)
 Nitrogen rate of fertilizer (baseline and project)
 Precipitation and evapotranspiration data

10. Questions
 Has NDRC approved any methodologies for nitrogen management on farms?
 What crops are grown most often in Kunming?
 Is anyone collecting data on nitrogen fertilizers being applied?
 Who advises farmers on nutrient management practices?
 How do applicable incentive programs interact with nutrient management
practices?

11. The market
 7 pilot trading schemes each allow
offsets for 5-10% of compliance
 National ETS to be launched in
2016
 Offset projects allowed are based
on CDM methodologies and focus
primarily on renewable energy,
fuel switching and
capture/destruction of methane
and other short lived pollutants

12. Thank you!
 65 SW Yamhill St. Suite 400, Portland Oregon, U.S.A.
 Ph. 503-238-1918 ext. 202
 spenrith@climatetrust.org
 www.climatetrust.org