Carbon credit market may boom

The world’s largest economy is expected to move swiftly toward a greener economy once Joe Biden becomes the 46th president of the United States, and Canadian companies and farmers are well positioned to capitalize.

“This isn’t applicable just to us,” said Alastair Handley from Radicle, an information technology company based in Calgary.

“Companies that have been involved in the carbon market in Alberta have massive knowledge sets and skill sets that they can apply in markets that exist or are emerging around the world.”

Radicle has traded in Alberta’s carbon market since 2008, and through emission markets it has paid out more than $50 million to its clients for their sustainable practices.

Handley said the processes and software that companies developed to work with Alberta’s conservation cropping protocols for agriculture and methane abatement protocols in the oil and gas sector give them a competitive advantage in emerging carbon markets because they have a proven track record of developing credits.

“We’re not just exporting agriculture expertise from Alberta with respect to the carbon market. We’re also exporting expertise with respect to oil and gas credits,” he said.

When it comes to recognizing the value that sustainable agriculture has on the environment and finding ways to compensate farmers who produce food in a sustainable manner, Handley said corporations are leading the charge.

“Corporations are driving the development of markets or protocols or credits in the agriculture sector much more than governments are right now,” Handley said.

“It’s a bit of a wild west I’d say right now in the States with respect to the number of organizations developing protocols.”

For instance, Indigo Agriculture’s Oct. 14 announcement included a list of large international brands committed to purchase verified agriculture carbon credits through the company’s subsidiary, Indigo Carbon.

Indigo Carbon offers to pay producers US$15 for every carbon credit earned, with two to three credits earned per acre achieved through sequestration or abatement, which can earn farmers $30 to $40 per acre every year.

“With respect to the dollar values they (Indigo Carbon) want to pay growers, if they can hit those that’s fantastic. But I don’t think those reflect the realities of the challenges that producers face right now to generate credits,” Handley said.

But it’s not just Indigo Ag that is developing agricultural carbon sequestration credits.

The Climate Action Reserve has a Soil Enrichment protocol that provides guidance on how to measure, monitor, report, and verify agricultural practices that enhance carbon storage in soils. Verra has a Verified Carbon standard and is working on protocols for the agriculture sector, and there are more.

“There’s soil enhancement protocols, regenerative agriculture protocols, there’s even grassland conversion protocols for leaving native grasslands in its existing state. These are mechanisms that exist to develop credits,” Handley said.

“Our objective, with our partners, is to simplify the process so that people can participate in the markets in a cost effective manner.”

Radicle recently signed a deal with a company it used to compete with in Alberta’s carbon sequestration space, Farmers Edge, to make it easier for Canadian farmers to access new carbon markets emerging around the world.

Wade Barnes of Farmers Edge said Radicle works on protocols at the regulatory level and is active in global carbon markets. It is connected to buyers interested in purchasing carbon credits, whereas Farmers Edge works at the field level with farmers.

He said Farmers Edge can be the piece that provides the reporting and validation function and provides the information to a company like Radicle that can use the story to create value.

“It could be being able to record the fact that a farmer put in a cover crop. It could be being able to record the fact that a farmer was able to reduce the amount of tillage passes that they’ve done, or they are buying equipment that is more fuel efficient, or probably the one that is the biggest is how they manage their nitrogen,” Barnes said.

He said Farmers Edge can report and verify nitrogen management programs,including when it was applied, whether an inhibitor was used and whether a grower uses variable rate technology and applies nitrogen in areas and times where it’s less likely to nitrify.

Farmers Edge already runs a calculation for producers to estimate their nitrogen losses every day due to denitrification, and it also keeps a close tab on yield data, which is important for many of the protocols.

Barnes said if there is a carbon sequestration protocol that works for Farmers Edge customers, they will be able to push a button to send their data to Radicle, which will then send it on to a buyer.

“Once we’ve got a bunch of farmers signed up, essentially we’ve got a bunch of information that if Radical can find a protocol that fits, find a market and then we can take that back to the grower and say, we can get you say $5 per acre but we have to send them this data. Are you comfortable doing that?” Barnes said.

There is also an opportunity for governments to help create structures that support farming practices that reduce greenhouse gas emissions and promote carbon sequestration.

“In Saskatchewan and Manitoba, there are a lot of acres out there that I think farms could get carbon offsets and get some value out of it. The only thing is they can’t make it too difficult,” Barnes said.

Alberta’s conservation cropping protocol is set to expire at the end of 2021 and it’s unclear what will replace it.

Alberta’s nitrous oxide protocol was so stringent it was almost impossible for a grower to trade any value out of it, but Handley said it is salvageable.

“The province’s (Alberta) nitrogen emission reduction protocol hasn’t been used at scale successfully. We need to see some minor changes, what I would consider minor changes, to the protocol to make it economically viable.”

The Saskatchewan government has talked about a market for carbon sequestration in the ag industry but there is nothing there so far, nor is there in Manitoba.

Handley said the federal government is looking to develop protocols beyond its output-based pricing system.

“The protocols they’re looking to develop are going to be focused on the agriculture, forestry and waste sectors. We know there are groups that are advocating for protocols around things like nitrogen management in the agricultural sector, that if approved would provide growers with the ability to participate in that market,” Handley said.

Putting carbon into the soil is of great interest in markets around the globe because it’s a nature-based solution to rising carbon levels in the atmosphere. However, it’s challenging to have an efficient process that classifies the emission reduction and converts it into credits.

“Protocols in the U.S. for nitrogen management require a lot of data. They require some pretty heavy computer modeling time to run the biogenic models to quantify the emissions reductions,” Handley said.

“It’s this system or the expertise that a company like Farmers Edge collects that we believe will give us an advantage in bringing credits to the markets in the States.”

It is difficult to know how much Canadian producers will be able to get through carbon sequestration schemes emerging in the United States, and Handley said it’s important to have realistic expectations, and patience.

“These markets are still complicated. There are a lot of people trying, trying really hard to create markets farmers will have access to,” Handley said

“No one can predict the future — the value of these credits may be significantly higher in the future than they are today. That’s what we’re hoping for.”

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