Farmers thinking about selling their carbon credits for 2003-06 through a Regina company needn’t worry about what they can do in 2007 and beyond.
A legal opinion prepared for the Saskatchewan Soil Conservation Association says contracts offered by C-Green Aggregators Ltd. don’t commit the farmer to anything beyond that four-year time frame.
The legal opinion by lawyer Mel Annand of Melfort, Sask., says the contracts don’t impose liabilities on a farmer after 2006, nor do they restrict a farmer’s ability to take out a 2007 contract with any other aggregator or to participate in any future Canadian system for dealing with carbon credits.
Read Also
Agriculture ministers agree to AgriStability changes
federal government proposed several months ago to increase the compensation rate from 80 to 90 per cent and double the maximum payment from $3 million to $6 million
However, Annand does say there are a number of other issues that farmers should discuss with C-Green and be sure they understand before signing a contract, including prices, payment schedules, non-compliance penalties and the rules and regulations of the Chicago Climate Exchange, or CCX.
The full text of the legal opinion has been posted on the association’s website at www.ssca.ca.
SSCA executive manager Blair McClinton said the association sought the legal analysis after receiving inquiries from farmers who had heard about C-Green but were concerned about the implications of signing contracts and wanted to know what the association thought.
“We wanted to make sure that it was looked at from a legal perspective just to make sure that everything was covered off.”
He said the association’s main concern was whether a farmer would take on liabilities or be restricted in what he could do with his land and his credits after 2006.
The legal opinion seems to have put that issue to rest.
“It alleviates a lot of our concerns in that there doesn’t seem to be anything that is going to limit farmers’ activities beyond 2006,” McClinton said.
C-Green’s most attractive feature may be its retroactive payments dating back to 2003, he added.
Jeff Gross, who set up C-Green along with his father Reg, said that while he was pleased that the legal opinion cleared up concerns about future liabilities or restrictions, he doesn’t think most of the other issues needed to be raised.
“The lawyer didn’t ask our opinion or talk to us and didn’t really understand the program,” he said.
For example, the legal opinion notes that the contract makes no mention of price or time of payment, which Gross said is because carbon credits are a commodity that will be traded in an open market and their value will be determined at the time of sale.
“It’s a live market with no fixed prices and it changes every day,” he said.
Under C-Green’s business plan, the company will act as a broker to sell farmers’ carbon credits from minimum-tilled land, based on crop insurance reports, on the CCX to companies that cannot meet their carbon dioxide reduction requirements.
The price of carbon on the CCX is now around $4 US a tonne, up from around $1.70 a year ago.
Based on that price, and a carbon sequestration rate of 0.4 tonnes per acre per year for black and grey soil zones and 0.2 tonnes for brown and dark brown, the value of the carbon credit to farmers over four years would be around $12,800 and $6,400 respectively, less commissions and fees.
The CCX, the only market in North America trading environmental commodities, has been in business since 2003 and trading agricultural soil offsets since April 2005.
C-Green has spent two years becoming operational and conducted its first trade this past May.
“It took a long time because we wanted to get it set up as well as we possibly could,” Gross said. “We’re trying to do something good for farmers here in the end.”
C-Green will pool the returns from sales and divide the proceeds equally among its clients. The deadline for sign-up is Aug. 3.
McClinton also echoed Annand’s comments that farmers should ask lots of questions before taking the plunge.
“There certainly are issues that you have to be comfortable with,” he said, adding it might be a good idea for individual farmers to consult with their own lawyers before signing contracts.
He said farmers should also remember that other opportunities for dealing with carbon credits could arise over the next couple of years, including the prospect of a distinctly Canadian system.
“I think keeping your options is a key as we move forward with this,” he said.
