Selling carbon credits may not be as lucrative for farmers as once thought.
Regulations in Saskatchewan to manage and reduce greenhouse gases are in development and some worry that farmers won’t reap the benefits of sequestering carbon on their land.
Doug Faller, policy manager for the Agricultural Producers Association of Saskatchewan, said there are questions about how much carbon is sequestered on farmland under the practice of zero till.
Environment Canada has estimated eight million tonnes per year, he told the recent APAS annual meeting, but other estimates are as high as 12 million tonnes.
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At a zero till adoption rate of 75 percent, about 25.5 million acres could be sequestering carbon. Using the Environment Canada estimate, each acre would be sequestering about .314 tonnes, Faller calculated.
In Saskatchewan, 29 facilities owned by 22 companies have been identified as licensed final emitters, or those eligible to buy the offsets. SaskPower is the largest.
The emitters can reduce their greenhouse gas emissions, buy offsets or pay into a technology fund to finance future investments in low-emission technology.
Faller said each emitter that opts to pay into the fund will pay $15 per tonne of carbon. The actual rate they would pay to farmers would be less.
In Alberta, where farmers have already been participating in an offset program, the price is about $12.50 per tonne.
Faller said if Saskatchewan farmers are sequestering eight million tonnes, at $12.50 per tonne, the value would be $100 million per year or $3.93 per acre.
He said the Saskatchewan Soil Conservation Association has estimated that farmers sequester .34 tonnes per acre in the black soil zone and .19 tonnes in the brown zones.
At a blended rate of .243 tonnes per acre, the 25.5 million acres under zero till would be sequestering only 6.2 million tonnes. At $12.50 per tonne, the value drops to $78 million.
Faller said there are also concerns about permanence, that farmers will take the money and plow up their land. And how do farmers prove how much carbon they have stored?
That pushes the stored carbon value even lower.
Faller said Alberta is moving to a rate of .12 tonnes per acre after an auditor said farmers can’t prove their practices are storing as much carbon as they say.
If Saskatchewan aligns with Alberta, as many have suggested it should, that drops the value to $39 million.
Other estimates and recommendations could see the total amount of stored carbon drop below one million tonnes and the value to about $8 million.
Out of that, farmers would have to pay the aggregators who assemble the credits and sell them to emitters. Faller said farmers should be able to own their credits and sell them whenever they want and to whom they want.
As well, the basic economic premise of supply and demand is at play.
Faller said those companies that emit more than 50,000 tonnes of carbon dioxide each year are required to reduce that by 20 percent over the next 10 years.
At a two percent reduction per year, that annual demand is only 600,000 tonnes.
Other issues include the possibility that Saskatchewan will not use 2006 as a base date but move it to 2011. That would mean no retroactive credits and a further loss of money.
The notion of “additionality” has also been mentioned. That theory suggests that zero-till is now business as usual and farmers shouldn’t be paid anything for something they do as normal practice.
Saskatchewan environment minister Dustin Duncan said nothing has been finalized and likely won’t be for some time.
He said it’s important to get the regulations right the first time and for all involved.
“My concern is that if you just kind of open it up to the market we could potentially have a lot of carbon credits into the market and not a lot of buyers,” he said.
“You could really make the offsets not worth a whole lot.”
He also said the regulations under this legislation go hand-in-hand with those of the Environmental Management and Protection Act.
“We’re putting together the environmental code for the province,” he said.
“That’s also taking a bit longer than we had suspected.
“Until the environmental code is ready to go we won’t be ready to proclaim the legislation or the regs (regulations).”
From $100 million down to $8 million, we’re down to a pretty small
