Canadian farmers who think the sale of carbon credits will be their ticket to riches should think again, say soil conservationists and farm groups.
The sale of carbon credits, a recognized greenhouse gas mitigation strategy under the Kyoto Protocol, could eventually become common practice on Canadian farms but there are still many issues to be addressed including prices, marketing mechanisms and ownership of soil-based carbon.
“Until the rules of ownership and the price of carbon offsets are clear, I don’t think there will be anything more than very speculative trades,” said John Bennett, former president of the Saskatchewan Soil Conservation Association.
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“At this point, the rules are very unclear. I think that aside from some very early speculators who are hoping to buy carbon credits very cheaply and reap a windfall profit, I don’t think much is going to happen until we have some firm rules.”
In an effort to meet its Kyoto Protocol obligations, the Canadian government has stated that it intends to set up a market for carbon credits or offsets.
The credits would be created by farmers and forestry companies that sequester carbon in plants, trees and the soil by altering their land management and harvesting practices.
Industries that surpass their greenhouse gas production production limits could then buy the offsets to compensate for their own emissions.
Estimates vary but according to the Soil Conservation Council of Canada, converting to a no-till cropping system would sequester about 0.7 tonnes of carbon per acre per year, depending on the soil type.
The estimated value of a tonne of sequestered carbon also varies widely, ranging from a couple of dollars a tonne to as much as $50.
According to Bennett, farmers could gain a modest source of revenue if a carbon market is established in Canada.
But there are pitfalls.
For example, productive farmland has a limited ability to store soil-based carbon and will eventually reach a point of carbon saturation.
A soil’s potential to sequester carbon is highest in the years immediately after conversion to no-till. That potential diminishes
gradually until the saturation point is reached after
approximately 20 years.
For farmers, this means revenues derived from the creation of a soil-based carbon sink would be temporary. In addition, farmers who are compensated for creating a carbon sink could face financial penalties if they decide to return to intensive tillage – a practice that would release trapped carbon back into the atmosphere.
Cecilia Olver, vice-president of the Agricultural Producers Association of Saskatchewan, recently issued a warning to farmers, suggesting they take a cautious approach to carbon offset sales.
She said it is unclear whether farmers will be able to claim the carbon offsets they produce.
Some producers are concerned that the provincial and federal governments will assume ownership of the offsets created by farm-based carbon sinks. This could be accomplished by attaching conditions to farm assistance programs or by offering incentives to farmers who adopt environmentally friendly farm practices.
“At this point, we’re encouraging farmers to understand the risks associated with such arrangements before they sign on the dotted line,” Olver said.
“First, while we believe these credits should belong to landowners to negotiate, we need to ensure this is the case. And secondly, we need to make sure the liability of emissions … isn’t transferred back to producers.”
So far, carbon credits sales involving farm groups have been rare.
In the late 1990s, GemCo, a Vancouver-based consortium of Canadian energy companies, struck a deal with an Iowa farm group to purchase 2.8 million tonnes of carbon offsets from grain and livestock producers.
GemCo president Aldyen Donnelly said the consortium tried to reach a similar deal with zero-till farmers in Saskatchewan but was unable to come to an agreement.
Internationally, the World Bank estimates that roughly $500 million has been spent on carbon credits since trading began in 1996.
In the United Kingdom, a voluntary carbon emissions market established last year has attracted about 800 companies.
And in Canada, the Winnipeg Commodity Exchange has announced its intention to explore the possibility of trading in carbon dioxide offsets.
“As Canada’s only commodity exchange, we believe we have a lot to offer in this area,” said WCE marketing director Bruce Love.
“It’s a real opportunity for us.”
