Canadian producer perspectives on agricultural soil offsets: Issues, Opportunities and Risks Blair McClinton, PAg Saskatchewan Soil Conservation Association Indian Head, SK, Canada

Fearless Prediction: Maximizing sink potential will depend on producers taking action!

Overview Introduction Permanence Additionality Policy Interactions Transaction Costs Questions to ponder

Introduction Saskatchewan has the highest level of no-till adoption in Canada (>60%) SSCA first approached on carbon trading Policy development for Ag soil sinks Helped setup soil carbon benchmark measurement project Established 1 st pilot carbon trade in Canada

Principles Atmospheric integrity –Permanence –Leakage Clear ownership Value must accrue to people taking action

Permanence Biological sinks can be reversed –Some debate on how sensitive sinks are to reversal events Permanence policies revolve around liability –Who will carry the liability?

Permanence Liability Cycle Sell Credits Maintenance Liability Repurchase Credits

Canadian Approaches Permanent credits with liability period –Liability transfers to seller for up to 30 yr? –Problem: not workable for farmers Temporary credits –Function like a lease –Liability remains with emitters –Problem: emitters don’t want liability either

Other Approaches Permanent Credit with Assurance Factor –Used in Alberta regulatory system –Built-in discount to account for future losses. –Risk sharing between farmers and government Private Insurance

Additionality Establishes baseline for business as usual practices

Additionality = Multiple Pools Creating separate pools would be difficult to administer and very expensive to monitor Creates Perverse Incentive –Rewards late adopters –Would create have and have not producers in the same community –Increases value of non-creditable land –Incentive for reversal events

Canadian Solution? Create one pool with adoption rate discount –Administratively simple –But reduces incentive and may reduce participation Periodic baseline reassessments –Increased discount rates

Policy Interactions Permanence and additionality – contradictory –Permanence says risk of losing carbon –Additionality says no risk of losing carbon Both policies discount carbon value and increase transaction costs May mean soil carbon effectively has no value at the farmgate

Competing Interests

Additionality Solutions? Look to “Net-Net” accounting rules from Marrakesh Accord Environmental baseline

Transaction Costs Farmers likely too small to justify individual credit sales Aggregation businesses Carbon banking or pooling Ownership

Verification/Validation Costs What level of verification is cost effective? –Aggregator data management –Farm Inspections Future possibilities –Remote sensing

Questions to Ponder How can we resolve contradiction between permanence and additionality? How can we minimize transaction costs to maximize value at the farm? Solutions to these questions will help make Ag soil offset trading a success!