1. Agriculture – Offsets Brian McConkey Agriculture and Agri-Food Canada Sector is engaged –All major farm groups aware of the issue and opportunities for farmers Successful model of offset system in Province of Alberta –Alberta protocols fast-tracked in future Canadian Federal System?

2. Alberta Offset System (http://www.carbonoffsetsolutions.ca/index.htm) First jurisdiction in North America to have hard caps on emissions Applies to all facilities that produce over 100,000 tonnes of CO 2 e –Baselines established from average emissions intensity from 2003-05 –Targets -12% off of baseline Facilities meet targets through: –Emission intensity gains from own operations –Invest in offsets –Pay (“invest in”) the government-managed Climate Change and Emissions Management Fund at CDN$15/tonne CO 2 e Funds used to develop or invest in Alberta-based technologies, programs, and other priority areas Effective cap on value of offsets.

3. Alberta Offset System Offset Protocols were based heavily on draft developments for a national Federal offset system in 2004-05 –Be real, demonstrable, quantifiable; –Not be required by law or paid by public funds; –Have clearly established ownership; –Be counted once for compliance purposes; –Be verified by a qualified third party Offset Protocols must follow ISO 14064 part b –Life cycle-like analysis –Requires that all GHG sources and sinks controlled, related, or affected by the project be considered –Reductions are all relative to baseline established as part of protocol

4. Alberta Offsets- Agriculture Protocols have been established for several agricultural activities –Edible oil in beef diets –Reduced slaughter age of beef cattle –Improved hog feeding –Improved handling and spreading of hog manure –Biogas production from animal manures –Adoption of reduced tillage (only protocol involving soil sinks)

5. Alberta Offsets- Agriculture Protocols being developed (where knowledge good and life-cycle reasonably simple) for: –Summerfallow Reduction Protocols being considered (where knowledge not so good and/or life cycle relatively complex) for –Conversion to Perennial Forages –Residue Management –Rangeland Management –Beef - Residual Feed Intake –Pasture Management –Soil Amendment –Beef grazing/forage system improvements –Nitrogen Use Efficiency –Wetlands Management (restoration)

6. Offset Implementation Government involvement and investment has been essential to protocol development –No protocols developed by private sector exclusively Non C-sequestering practices follow the “industrial model” –Documenting start of practice relatively simple –No permanency issues However, C sequestration by no-till has been most successful in terms of delivering offsets to market –Over half of total offsets –Large area so attractive business for aggregators –All have used the so-called “default coefficient method”

7. Eligibility- No-till Under the “default coefficient” method, all farmers using practice in project area are eligible –Approach adapted from draft Federal offset system protocol of 2005 However offset is only for C sequestered from the proportion above baseline of adoption at time of project eligibility (2002 in Alberta, 2000 in federal system?) –E.g. if 30% of land in no-till in 2002 then only 70% (i.e. 100-30%) of the C sequestered under no-till is included for crediting (i.e. assume 30% of land in project was in no-till at start of project) –Crediting period >= 2002 in Alberta (>=2008 in Federal system?)

8. “Default Coefficient” Method Addresses problem of practical infeasibility of determining tillage history Provides incentive for maintenance of C sequestering practice Rewards early adopters –Partially penalizes late adopters Removes perverse incentive to stop C- sequestering practice in hope of being able to make land eligible at later date

9. Verification Have been much experience with verification under Alberta, CCX, and Federal trial systems –Third-party verification always been supplemental activity to existing businesses (e.g. financial accounting, crop insurance) No-till verification hierarchical –Desktop verification (general) Area farmed, documentation of eligible machinery, etc. –Farm visit (audit) check machinery, fuel purchases, etc. –In-season field (exceptional audit) Field inspection to determine if no-till was practiced (No penalty/no reward for voluntary reporting that no-till was not practiced has been proven successful)

10. Permanence and Liability Alberta system –Government of Alberta has discounted the amount of the offset (10-12.5%) and accepted liability for any future reversals. –Discount includes the permanent reductions (reduced N 2 O and fossil fuel emissions) and C sequestration –“Breakthrough” that makes C sequestering offsets economically feasible –No monitoring after project so no plan to know if there has been reversals in specific projects Canadian Federal System ? –This was stopper for initial development of C- sequestration protocols in mid 2000s

11. Relationship to Inventory Need for “bottom line” that determines if Government targets have been met –Captures “leakage” within country Trading with under Kyoto Protocol requires any emission reduction be assigned to RMU or AAU Alberta used national inventory GHG quantification methods where possible –Federal system?

12. Summary Offsets provide large opportunity for agricultural sector –Have good experience with several offsets –Anticipated offset values will never drive agricultural practices If left to private sector alone to develop protocols there will likely be few agricultural offsets C-sequestrating offsets will require government underwriting of liability for reversals –Too complex and unknown risk to expect this to be accomplished through private sector