Iowa Farm Bureau Carbon Credit Aggregation Program

Document Sample
Iowa Farm Bureau Carbon Credit Aggregation Program Powered By Docstoc
					           Iowa Farm Bureau
        Carbon Credit Aggregation
                Program



3/13/2007      Iowa Farm Bureau, West Des Moines, IA   1
               Topics to be Covered

• What is Carbon Sequestration?
• Background on the Chicago Climate
  Exchange
• Exchange Offsets
     – Soil Offsets
     – Methane Offsets
     – Forestry Offsets
• Exchange Offset Sales Contracts

3/13/2007         Iowa Farm Bureau, West Des Moines, IA   2
              Carbon Sequestration
• Carbon sequestration can be defined as the
  capture and secure storage of carbon that would
  otherwise be emitted to or remain in the
  atmosphere.
• What are Carbon Credits?
  – Carbon credits encompass two ideas:
    (1) Prevention/reduction of carbon emissions produced
    by human activities from reaching the atmosphere by
    capturing and diverting them to secure storage.
    (2) Removal of carbon from the atmosphere by various
    means and securely storing it.

  3/13/2007        Iowa Farm Bureau, West Des Moines, IA   3
              Loss of Soil Carbon

                       Causes…..
• Shifting Land Use
   – Grass or trees to crops or development
• Cultivation
   – Increased aeration
   – Increased soil temperature
• Soil Erosion
   – Carbon Transport
   – Lower Productivity

3/13/2007        Iowa Farm Bureau, West Des Moines, IA   4
            Value of Increasing S.O.M.

•   Improves soil structure
•   Decreases erosion
•   Increases infiltration
•   Increases soil water holding capacity
•   Decreases the energy requirement for
    cultural operations



3/13/2007        Iowa Farm Bureau, West Des Moines, IA   5
                    Soil Carbon Sequestration
                         Why is S.C.S. important?

• Changes in agricultural management can potentially
  increase the accumulation rate of soil organic carbon
  (SOC), thereby sequestering CO2 from the atmosphere.
• On average, a change from conventional tillage (CT) to
  no-till (NT) can sequester .17 to .35 t/acre/yr C. Which
  is equivalent to .5 to 1 t/acre/year of CO2..
•   Soil Organic Carbon Sequestration by Tillage and Crop Rotation: A Global Data
    Analysis, Soil Science Society of America Journal 66:1930-1946 (2002) Tristram O.
    West and Wilfred M. Post




    3/13/2007                 Iowa Farm Bureau, West Des Moines, IA                 6
                    Carbon Storage on Ag Land
• U.S. crop land can store 142 MMT of carbon per
  year
   – 8-9 percent of total U.S. emissions.
• Private grasslands could store an additional 70
  MMT of carbon per year
   – 4-5 percent of total U.S. emissions.
• CRP lands currently store 10 MMT of carbon per
  year.

     *According to Marlen Eve, USDA/ARS, Fort Collins


3/13/2007                 Iowa Farm Bureau, West Des Moines, IA   7
               Iowa Farm Bureau’s Focus

             Reduced Tillage (NT,RT or ST)
     –      Continuous
     –      Individual producers/landowners
     –      Carbon credit trading occurs every day


              The Chicago Climate Exchange
     –      Phase 1 - Pilot Project 03’ – 06’
     –      Phase 2 – Pilot Project 06’ – 10’


3/13/2007             Iowa Farm Bureau, West Des Moines, IA   8
            The Chicago Climate Exchange®
• The Chicago Climate Exchange® (CCX®) is a
  greenhouse gas (GHG) emission reduction and
  trading pilot program for emission sources and
  offset projects in the United States and for offset
  projects undertaken in Brazil. CCX® is a self-
  regulatory, rules-based exchange designed and
  governed by CCX® Members.
• These members have made a voluntary, legally
  binding commitment to reduce their emissions of
  greenhouse gases by four percent below the
  average of their 1998-2001 baseline by 2006, the
  last year of the first phase of the pilot program.


3/13/2007          Iowa Farm Bureau, West Des Moines, IA   9
                 CCX Reduction Timetable

•   2003-2006: Reduce emissions to 1%, 2%, 3%, 4% below 1998-2001 baseline
•   2006 – 2010: Reduce emissions to 6% below 98-01 baseline




                     CCX Emission Reduction Schedule
    100%
     99%
     98%
     97%
     96%
     95%
     94%
     93%
     92%
            1998- 2003    2004   2005    2006    2007   2008    2009   2010
            2001


3/13/2007                   Iowa Farm Bureau, West Des Moines, IA             10
               CCX Founding Members
   American Electric Power                       Manitoba Hydro
     Ford Motor Company                           MeadWestvaco
              Baxter                                   Motorola
              DuPont                          STMicroelectronics
   Waste Management Inc.                              Stora Enso
   Equity Office Properties                       Temple-Inland
        International Paper                      City of Chicago
*Many more entities have joined the CCX, with new members joining
  almost daily.
3/13/2007              Iowa Farm Bureau, West Des Moines, IA        11
            CCX Mission Statement

• The CCX mission is to provide its members
  from the private and public sectors with cost-
  effective methods for reducing their
  greenhouse gas emissions by building and
  operating a market-based emission reduction
  and trading program that is flexible, has low
  transaction costs, is environmentally rigorous
  and rewards environmental innovation.




3/13/2007       Iowa Farm Bureau, West Des Moines, IA   12
                       Global Warming

• “Global warming,” or climate change, can
  occur when the blanket of GHGs gets thicker.
• The six types of GHGs covered under global
  warming policies and in trading programs are:
     –      Carbon dioxide (CO2)
     –      Methane (CH4)
     –      Nitrous Oxide (N2O)
     –      Sulfur hexafluoride (SF6)
     –      Perfluorocarbons (PFCs)
     –      Hydrofluorocarbons (HFCs)

3/13/2007              Iowa Farm Bureau, West Des Moines, IA   13
                   Greenhouse Gases
•   Carbon Dioxide (CO2)
•   Methane (CH4)
•   Nitrous Oxide (N2O)
•   Sulfur Hexafluoride (SF6)
•   Perfluorocarbons (PFCs)
•   Hydrofluorocarbons
    (HFCs)



                                         •   6.9 billion metric tons CO2e total
                                         •   545 million metric tons from CH4
                                         •   ~40 million metric tons from
                                             manure management alone

3/13/2007            Iowa Farm Bureau, West Des Moines, IA                   14
                  Iowa Farm Bureau Aggregation

•       Aggregating Exchange Soil Offsets (XSOs)
      –         Continuous No-till, ridge-till or strip-till
      –         New Grass plantings after Jan 1, 1999
      –         Rangeland Management
•       CCX Aggregator qualifications
      –         Must be qualified entity with a $1 million net
                worth and $10 million in assets.
      –         Country elevator of carbon credits.


    3/13/2007                Iowa Farm Bureau, West Des Moines, IA   15
                  XSO Eligible Land

• Land must be in the eligible project area
• Land must be capable of being cropped
     – Must be farmed with no-till, strip till or ridge
       till practices
     – Crop land can be in hay, but if row-cropped
       must be done in compliant manner
• Or crop land that was recently converted to
  permanent grass (after Jan 1, 1999)


3/13/2007           Iowa Farm Bureau, West Des Moines, IA   16
                          Tillage Equipment
• Full width inversion                        • Okay to use
      –     Moldboard plow                         –   No-till/ridge-till planter
      –     Chisel plow                            –   No-till drill
      –     Field cultivator                       –   Rolling harrow
      –     Tandem disk                            –   Phillips and Phoenix harrow
      –     Offset disk                            –   Subsoiler/ripper
      –     Row crop cultivator (except            –   Anhydrous applicator
            ridge till)                            –   Manure knife applicator
                                                   –   Ridge till cultivator

•   General Guideline: After the implement has been through the field, there must still
    be a substantial amount of surface residue present and the soil disturbance must not
    be full width. If use of the implement would require that a leveling or smoothing
    activity follow, it would probably result in too much soil disturbance.

3/13/2007                   Iowa Farm Bureau, West Des Moines, IA                 17
            UU.S. Central Region for CCX® Soil Offsetssets




                                                Offsets for no-till or grasses
                                                    Offsets for grasses only



3/13/2007            Iowa Farm Bureau, West Des Moines, IA                       18
3/13/2007   Iowa Farm Bureau, West Des Moines, IA   19
                 IFB Pool 1-3 Statistics
State       Total               No-till Acres       New Grass          Total Acres
            Contracts                               Acres
CO                         6                    0               660                  659
IA                       478           220,632             26,298             247,023
IL                         8              9,737                   33            9,770
IN                         2              1,602                 315             1,917
KS                        95            96,972              1,392              98,276
KY                         1                641                   20                 661
MI                         1                739                 259                  998
MN                        10              3,747                 634             4,381
MO                         3                    6               238                  244
NE                       703           469,333             26,363             495,823
OHIO                       7             4,754                  242             4,996
SD                        10              6,942                 578             7,520
WI                         5              5,490                 339             5,829
Total                   1,337          820,390             57,305             877,827
3/13/2007                 Iowa Farm Bureau, West Des Moines, IA                            20
            Eligible Ohio Nt and Gr Counties

                  OHIO - 44 counties
• Adams, Allen, Auglaize, Brown, Butler,
  Champaign, Clark, Clermont, Clinton, Crawford,
  Darke, Defiance, Delaware, Fairfield, Fayette,
  Franklin, Fulton, Greene, Hamilton, Hancock,
  Hardin, Henry, Highland, Logan, Lucas, Madison,
  Marion, Mercer, Miami, Montgomery, Morrow,
  Ottawa, Paulding, Pickaway, Preble, Putnam,
  Sandusky, Seneca, Shelby, Union, Van Wert,
  Warren, Wood, Wyandot.

3/13/2007           Iowa Farm Bureau, West Des Moines, IA   21
            Eligible counties for NT and Grass

                 Michigan – 41 counties
• Allegan, Barry, Bay, Berrien, Branch, Calhoun,
  Cass, Clinton, Eaton, Genesee, Gratiot, Hillsdale,
  Huron, Ingham, Ionia, Isabella, Jackson,
  Kalamazoo, Kent, Lapeer, Lenawee, Livington,
  Macomb, Mecosta, Midland, Monroe, Montcalm,
  Meskegon, Newaygo, Oakland, Oceana, Ottawa,
  Saginaw, Sanilac, Shiawassee, St. Clair,
  St. Joseph, Tuscola, Van Buren, Washtenaw,
  Wayne

3/13/2007            Iowa Farm Bureau, West Des Moines, IA   22
              POOL “5” XSO Sign-Up
• Eligible areas
     – Zone “A” for no-till & “new” grass
     – Zone “B” for “new” grass
• Efforts underway to establish credit rates for areas
  not included in Zones A or B
• Hope to have the expanded area approved for pool
        5 sign-up which is taking place now ---
                Nov 2006 – June 2007.
• March 1, 2007 meeting to secure the entire U.S.
• Commitment from 2006-2010

3/13/2007           Iowa Farm Bureau, West Des Moines, IA   23
            Documentation For CCX® Ag sector offsets
• Enrollment form information (Example)
• legal description of acreage, practice(s) employed
• FSA maps and most recent crop report (CCC-578)
• Leased ground: reasonable expectation that acres are
under control though 2010.
    • Failure to keep land in compliance throughout the pilot
       program voids all credits on non-compliant land during the
       pilot program.
• Submit annual signed attestation to aggregator
• acknowledge that CCX verifiers will be given access to
fields and CCX documents

3/13/2007             Iowa Farm Bureau, West Des Moines, IA     24
                         XSO Enrollment Application
Farm Bureau Management Corp.                                              Contract No.__________________
5400 University Ave
West Des Moines, Iowa 50266
     APPLICATION FOR PARTICIPATION IN A SOIL CARBON POOL and
      SALES CONTRACT for EXCHANGE SOIL OFFSETS (XSOs)

Seller___________________________________ Phone_________________ Date__________________

Address_________________________________ City/State/Zip__________________________________

  I, ______________________________, hereby apply for participation in a soil carbon pool managed by the
  Farm Bureau Management Corporation to register Exchange Soil Offsets (XSOs) with the Chicago Climate
  Exchange (CCX) for the years 2006-2010on property that I own or control. I hereby agree that _______ acres
  shall be in continuous conservation tillage as defined in this Agreement and that ______ acres shall be in
  continuous grass cover that was established on or after January 1,1999. I further agree that I will abide by the
  rules of the CCX as they pertain to XSOs and to the conditions for Pool participation as set forth in this
  agreement.

  Signed_________________________________ Date__________________________

  •Purchaser agrees to buy and seller agrees to sell and deliver to purchaser free from liens and encumbrances at 5400
  University Ave, West Des Moines, Iowa, the rights to the Exchange Soil Offsets (XSOs) created during the years 2006
  through 2010 through the application of


  •Conservation Tillage to ___________ acres and/or Permanent Grass Cover to ____________ acres as submitted in the
  Exchange Soil Offset Enrollment Worksheet.
  •Please complete and attach the Exchange Soil    Offset Enrollment Worksheet


 3/13/2007                                      Iowa Farm Bureau, West Des Moines, IA                                    25
                  XSO Enrollment Form Cont’d
•   XSOs accrue at the rate of 0.5 XSO per acre per year for eligible minimum till/No-till. (Zone A)
•   XSOs accrue at the rate of 0.75 XSO per acre per year for permanent grass cover. (Zones A & B)
•   20% of the accrued XSOs shall be held in reserve by the Purchaser until Dec 31, 2010.

•   Seller warrants that the XSOs covered by this contract comply with all rules of the
    Chicago Climate Exchange. In particular Seller warrants that the land from which the
    XSOs covered by this contract arise shall be in continuous conservation tillage or
    permanent grass cover, as applicable, during the period January 1, 2006 through
    December 31, 2010. In the event that the land fails to meet these requirements, all
    XSOs from such land shall be null and void and any payments for XSOs delivered
    prior to January 1, 2011 shall be repaid subject to interest and penalties as provided in
    this agreement.

•   The transfer price of the XSOs covered by this contract shall be the sales price as
    determined by sale through the Chicago Climate Exchange less a 10% service fee.

•   Sale of XSOs covered by this contract shall be at the sole discretion of the Purchaser,
    however all XSOs shall be priced no later than June 30, 2011.



    3/13/2007                     Iowa Farm Bureau, West Des Moines, IA                       26
            XSO Enrollment Worksheet




3/13/2007        Iowa Farm Bureau, West Des Moines, IA   27
                     Methane Offsets

• Ag Methane destruction projects that were put into
  place after Jan 1, 1999.
• Carbon Credits (CC) accrue at the rate of 18.25
  tons CO2 per ton of methane
      Dairy Project: 5,000 head generates an est. 1,400 t/m/yr
     – One cow generates an est. .28 t/m/yr
     – One cow accrues an est. 5.11 CC/yr
     – One cow generates around $20.44/yr
• Have submitted 7 methane projects for approval


3/13/2007            Iowa Farm Bureau, West Des Moines, IA   28
            FORESTRY OFFSETS (XFO’s)

• What projects are eligible?
     – Planting and/or natural regeneration after Jan 1, 1990
       on land not forested on Dec 31, 1989.
• Credits based on annual increase in carbon stocks
  (CO2 equivalents) during 2003-2010.
• Long-term commitment
     – Evidence that the carbon stocks in forest parcels will be
       subject to long-term maintenance in a manner deemed
       acceptable by CCX Offset Committee (easement,
       contract, etc.)


3/13/2007             Iowa Farm Bureau, West Des Moines, IA     29
                   Forestry Offsets Cont’d

• Protective status instruments:
     – Long-term conservation easements providing
       that the land will be maintained as a forest
     – Transfer of ownership of land parcels to a land
       trust, qualifying non-governmental organization
     – Other means that the CCX Offset committee
       deems acceptable
            • Statement of Intent




3/13/2007               Iowa Farm Bureau, West Des Moines, IA   30
            Forestry Statement of Intent
Statement of Intent to Maintain Forest Cover and Manage
Forestry Offset Land in a Sustainable Forestry System

  I,___ ______, hereby attest that it is the intent of the
  owners of the land enrolled in the Chicago Climate
  Exchange Forestry Offset program through the Iowa Farm
  Bureau contract number __XFO-0000_ to maintain the
  enrolled land in forest cover and to manage such lands in
  compliance with the principles and practices of sustainable
  forestry systems.
_____________________________
Owner
_____________________________
Date

3/13/2007           Iowa Farm Bureau, West Des Moines, IA   31
            U.S. CCX Forestation Projects

• Small - Projects that are less than 2,000
  metric tons of CO2/yr.
• Medium – Projects that are more than 2,000
  metric tons of CO2/yr and less than 12,500
  metric tons of CO2/yr.
• Large – Projects that are more than 12,500
  metric tons of CO2/yr.



3/13/2007         Iowa Farm Bureau, West Des Moines, IA   32
              Forestry Offsets Cont’d

• XFOs will be issued based on annual
  increases in above-ground living biomass.
• 250 stems/acre of measurable trees
• Small forestation projects are subject to
  verification by CCX approved verifiers.
     – Working with CCX to establish initial
       assessment protocol.
     – Credits allocated according to tables in CCX
       rulebook

3/13/2007          Iowa Farm Bureau, West Des Moines, IA   33
                      Forestry Offset Table 10.2A
            Appendix Table 10-2A                      Dense Planting (>250 stems per acre) Forestation Project Carbon
                                                      Accumulation Table (Metric tons CO2 per acre per year)1

                                                         Years since planting
            U.S. region and species*                       0-5       5-10     10-15           15-20
            SE Loblolly                                    1.51      1.86      6.99            6.17
            SE Slash                                       1.51      1.75      6.52            5.83
            SE longleaf pine                               1.40      1.51      5.24            4.78
            Delta loblolly                                 2.21      2.80      7.81            7.92
            Delta slash pine                               2.10      2.68      7.69            7.69
            Southern plains loblolly                       2.10      2.45      6.87            6.87
            Appalachian loblolly                           1.63      1.98      7.11            6.41
            Appalachian shortleaf pine                     1.51      1.75      6.52            5.71
            Northeast white/Norway spruce                  1.28      1.28      1.40            2.56
            Northeast red pine                             2.68      3.38      3.50            3.50
            Lake States, white spruce                      3.61      4.78      4.66            5.01
            Lake States, red pine                          2.10      2.45      2.56            4.31
            Corn Belt mixed hardwoods                      3.50      4.54      4.66            4.78
            Corn Belt mixed softwoods                      3.96      5.13      5.36            3.50
            Northern Plains, mixed hardwoods               1.98      2.45      2.45            2.45
            Rocky Mountains, ponderosa pines               1.40      1.40      1.51            2.33
            Pacific Coast Douglas fir                      1.05      1.40      1.28            3.26
            Pacific Coast ponderosa pine                   1.63      0.70      0.82            0.93




            1
             Source: The values in Table 10-1A are 70% of the annualized carbon accumulation quantities for carbon in live
            vegetation that are reported in “Regional Estimates of Timber Volume and Forest Carbon for Managed Timberland”
            by Richard Birdsey, in “Forests and Global Change”, Volume 2: Forest Management Opportunities For Mitigating
            Carbon Emissions, Sampson, R.N., and Hair, D., eds.




3/13/2007                                                 Iowa Farm Bureau, West Des Moines, IA                              34
                                   Forestry Offset Worksheet
                                                       Forestry Offset Worksheet

Name                                                                                             Contract Number:



Location                                                                                         Worksheet No:

Parcel     Parcel    Tree    Parcel       Parcel    Sample    Tree      Sample       Sample           Sample          Parcel       Parcel         Parcel

Number      Acres    Type   Plant Date   Tree Age   Factor   Spacing   Basal Area   Tree Count       Tree dbh       Tree Count   CO2 Factor      CO2 Tons




         3/13/2007                                  Iowa Farm Bureau, West Des Moines, IA                                                   35
            Mechanics of Ag Offset Aggregation in CCX®

                                       CCX
                        - issues offsets to aggregator’s
                                registry account
                            - commissions verifiers
            documentation                                offsets
                                    Aggregators
                     - accepts initial registrations from producers
               - assembles annual attestations of activities from producers
                    - receives offsets into CCX registry account from
             - executes sales on CCX trading platform on behalf of growers
                         - manage multi-grower reserve account

              documentation                               sales proceeds
                               Individual Growers
                   - register; undertake actions as per 5-year contract;
                      sign annual attestations; allow access to CCX
                            verifiers; ultimate owner of offsets
3/13/2007                   Iowa Farm Bureau, West Des Moines, IA             36
                                                                 Carbon Offset Prices
                                                                     2004 - 2006
                                                                                2006 Vintage
                                                                             Carbon Offset Prices

                   5.10


                   4.60


                   4.10


                   3.60
$ Per Metric Ton




                   3.10


                   2.60


                   2.10


                   1.60


                   1.10


                   0.60
                                                                     ov




                                                                                                                            ov




                                                                                                                                                                                    ov
                                ar




                                                                                       ar




                                                                                                                                              ar
                                                             p




                                                                                                                    p




                                                                                                                                                                           p
                        n




                                         ay




                                                                               n




                                                                                                ay




                                                                                                                                      n




                                                                                                                                                       ay
                                                   l




                                                                                                          l




                                                                                                                                                                 l
                                                 Ju




                                                                                                        Ju




                                                                                                                                                               Ju
                      Ja




                                                                             Ja




                                                                                                                                    Ja
                                                          Se




                                                                                                                 Se




                                                                                                                                                                        Se
                               M




                                                                    N




                                                                                      M




                                                                                                                           N




                                                                                                                                             M




                                                                                                                                                                                   N
                                        M




                                                                                               M




                                                                                                                                                      M
                                              5-




                                                                                                     5-




                                                                                                                                                            5-
                   5-




                                                                 5-



                                                                          5-




                                                                                                                        5-



                                                                                                                                 5-




                                                                                                                                                                                5-
                            5-




                                                                                   5-




                                                                                                                                          5-
                                                       5-




                                                                                                              5-




                                                                                                                                                                     5-
                                     5-




                                                                                            5-




                                                                                                                                                   5-
3/13/2007                                                         Iowa Farm Bureau, West Des Moines, IA                                                                        37
            Price forecasts for US carbon credits

            Figure 1. Projected price curves for US carbon credits ($US per metric ton).

             $35
              $35

             $30
              $30

             $25
              $25

             $20                                                                                                      hi
              $20                                                                                                       hi
                                                                                                                      low
                                                                                                                        low
             $15                                                                                                      med
              $15                                                                                                       med

             $10
              $10

              $5
               $5

              $0
               $0
                2004           2006          2008          2010          2012          2014          2016
                 2004           2006          2008          2010          2012          2014          2016


            Sources: Carbon Finance, August 2004; EIA/DOE 2004. Analysis of S. 1844, the Clear Skies Act of 2003; S. 843, the
            Clean Air Planning Act of 2003; and S. 366, the Clean Power Act of 2003. Energy Information Administration, USDOE,
            SR/OIAF/2004-05, May 2004; EIA/DOE 2005. Impacts of Modeled Recommendations of the National Commission on
            Energy Policy. Energy Information Administration, USDOE, SR/OIAF/2005-02, April 2005; AEP 2004. An assessment of
            AEP’s actions to mitigate the economic impacts of emissions policies. American Electric Power, August 31 2004



3/13/2007                                Iowa Farm Bureau, West Des Moines, IA                                                   38
            Contract Facilitators

• Opportunity for state farm bureaus to
  extend carbon market participation to
  members
• Associate Aggregator Program
• Contract Facilitator Program




3/13/2007      Iowa Farm Bureau, West Des Moines, IA   39
                 Enrollment Forms

• Enrollment forms are available at:
• www.iowafarmbureau.com


 •http://www.iowafarmbureau.com/special/carbon/default.aspx




3/13/2007         Iowa Farm Bureau, West Des Moines, IA   40
               Contact Information

             David Miller or Chad Martin
            Iowa Farm Bureau Federation
                5400 University Ave
             West Des Moines, IA 50266


              Ph: 515-225-5431
            E-mail: damiller@ifbf.org
            E-mail: cmartin@ifbf.org


3/13/2007        Iowa Farm Bureau, West Des Moines, IA   41