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B.C.’s Agricultural Sector
AND THE GREENHOUSE GAS
REDUCTION TARGETS ACT
This document is intended to provide background information only about the
Greenhouse Gas Reduction Targets Act (GGRTA), 1 and the type of agricultural projects
that may be able to generate offsets for sale to the Pacific Carbon Trust (PCT). Any
language used in this document should be superceded by that used in the Emissions
Offsets Regulations paper 2 and the GGRTA. The authors acknowledge this, and
emphasize that this document should be used for guidance only.
June 2009
1
Bill 44 – 2007 Greenhouse Gas Reduction Targets Act (www.leg.bc.ca/38th3rd/3rd_read/gov44‐3.htm).
2
Greenhouse Gas Reduction Targets Act, S.B.C. 2007, c. 42, s. 12 (www.env.gov.bc.ca/epd/codes/ggrta/pdf/offsets‐
reg.pdf).
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Table of Contents
Section 1
This section provides some basic background information on carbon offsets in B.C.
This includes an introduction to the Greenhouse Gas Reductions Target Act
(GGRTA), the Pacific Carbon Trust (PCT) and an explanation as to what is a carbon
offset.
Section 2
This section is intended to provide the reader with a greater understanding as to
the type of projects that will be eligible to sell carbon offsets to the PCT. As such,
this section provides the criteria that the PCT will use to determine the eligibility
of offset projects.
Section 3
The final section provides several examples of potential offset projects that might
be proposed in B.C. The eligibility criteria (Section 2) are then utilized to evaluate
the eligibility of the projects to sell carbon offsets to the PCT.
2
2
Section 1
What is the Greenhouse Gas Reduction Targets Act (GGRTA)?
Under the Greenhouse Gas Reductions Targets Act (GGRTA), the Provincial Government has
committed to establishing a carbon‐neutral public sector by 2010. This commitment means that
all Public Sector Organizations (PSOs) in B.C., such as ministries, school districts, universities,
colleges, health authorities, Crown corporations and other government agencies, will have to
achieve zero net greenhouse gas 3 emissions (GHGs) from their operations 4 by 2010. To achieve
zero net GHG emissions (also known as ‘carbon neutral’) a PSO must:
pursue actions to minimize its own GHG emissions (e.g., reduce employee travel,
improve energy efficiency of buildings, use less paper, etc.), and
use carbon offsets acquired by the Pacific Carbon Trust (PCT) to cancel out any remaining
GHG emissions that it is unable to reduce to zero through its own actions.
3
GHGs are gases in the earth’s atmosphere that are thought very likely to be contributing to climate change because
of increased atmospheric concentrations (due to human activity).
4
For a full list of operations, see www.qplegaleze.ca/logon/logon.aspx?vid=QPLEGALEZE:reg_view.
3
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What is the Pacific Carbon Trust (PCT)?
The Pacific Carbon Trust (PCT) is a provincial Crown corporation
B.C.’s agriculture
dedicated to acquiring carbon offsets so that PSOs and other sector may be
clients can achieve their carbon‐neutral objectives. The PCT will able to sell
only purchase carbon offsets that are generated from projects eligible carbon
or activities within B.C. and that meet the provincially defined offsets to the PCT
eligibility criteria for qualifying carbon offsets. While initial PCT from
agriculturally‐
demand for carbon offsets will be modest, this demand is
based offset
expected to increase rapidly, reaching between 700,000 and 1
projects.
million carbon offsets annually by 2010.
What is a Carbon Offset?
A carbon offset is generated when someone
Carbon dioxide equivalent refers to
voluntarily undertakes a project/action that,
climate change impact of the GHG
reduces the amount of GHG emissions entering the
emitted. For example, methane has a
atmosphere (reduction), prevents GHG emissions
carbon dioxide equivalency of 21.
from entering the atmosphere (avoidance), or
This means that a tonne of methane
increases the amount of GHG emissions being taken
emissions has the same impact as 21
out of the atmosphere (removal enhancement) 5 .
tonnes of carbon dioxide emissions.
Each carbon offset is equal to one metric tonne of
It also means that for every tonne of
carbon dioxide equivalent (tCO2e). Thus, for every
methane emissions reduced or
carbon offset that a PSO buys, its own total annual
avoided by a voluntary project, 21
GHG emissions will be reduced by one metric tonne
offsets will be generated.
of carbon dioxide equivalent (tCO2e).
Carbon offsets are sometimes referred to as carbon credits. However, there is an important
difference. Carbon offsets are GHG reductions, avoidances or removal enhancements that
occur as a result of voluntary projects/actions. Carbon credits refer to either carbon offsets
or carbon allowances.
5
Removal enhancement, also known as sequestration, removes carbon dioxide from the atmosphere and traps it
as organic carbon in the soil or trees.
4
4
Carbon offsets can be found in both A carbon allowance is not created through GHG
voluntary and mandated carbon reductions, avoidance or removal enhancements
markets. They can be purchased by projects/actions. Instead, it is an authorization to emit a
anyone trying to reduce their GHG certain amount of GHG emissions (similar in principle to
emissions for mandated or non‐ a fishing licence, where the owner is authorized to
mandated purposes. catch a certain number of fish). Each carbon credit
Carbon allowances are only found in within the allowance enables the owner to emit one
mandated carbon markets. They metric tonne of carbon dioxide (tCO2e).
can be traded between companies Carbon allowances are given out by a regulatory body
within the same mandated (e.g., government) to industries/sectors that have been
industries/sectors to help them mandated to limit the tCO2e they emit. Part or all of
meet the reduction obligations. these carbon allowances can be traded between
companies within the industries/sectors that have been
mandated to limit their GHG emissions. In addition to trading carbon allowances, companies that
have been told to limit their GHG emissions can also purchase carbon offsets from non‐
mandated industries/sectors (such as B.C.’s agriculture sector).
Carbon offsets are created through projects/actions that reduce or avoid GHG
emissions from entering the atmosphere, or removal enhancement projects/actions
that increase the amount of GHG emissions being taken out of the atmosphere
Reduction/Avoidance Removal Enhancement
Projects Projects
Baseline
Removals Emissions
GHG emission
reduction =
offsets
tCO2e
Baseline
Project
GHG removal
enhancement
= offsets
Project
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Section 2
What projects will be eligible to sell offsets to the PCT?
When a project proponent submits a project plan 6 to the PCT, seven criteria will be used to
determine the eligibility of the offset project. Only projects that meet all seven of the criteria
will be eligible to sell carbon offsets to the PCT. 7 These criteria are:
Within scope
Measurable
Real
Additional
Verifiable
Clear ownership
Counted once
Within scope
The six eligible GHGs are carbon dioxide (CO2), methane (CH4), nitrous
oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and
sulphur hexafluoride (SF6). Only projects that reduce these gases and are
carried out within B.C. will be eligible to sell carbon offsets to the PCT.
Measurable
Project proponents must identify a specific methodology to quantify their offset project’s GHG
reductions. This methodology, which will enable the project proponent to quantify the tCO2e
that the offset project will reduce, avoid or remove, must estimate these reductions in an
accurate and conservative manner. Project proponents must also justify the specific
methodology utilized and, if applicable, any adjustments made.
6
The project plan will provide details about the offset project, including what the project entails, how it will be
carried out and how the GHG reductions, avoidance or removal enhancements will be calculated. The project plan
must be prepared in accordance with the Emission Offset Regulation
(www.env.gov.bc.ca/epd/codes/ggrta/pdf/offsets‐reg.pdf).
7
While all eligible B.C.‐based projects can submit a proposal to supply carbon offsets to the PCT, the PCT is under no
obligation to buy the carbon offsets from every eligible project.
6
6
Real
GHG reductions must be derived from specific
Leakage example: A farmer who plants
identifiable actions, and offset projects must
trees on previously productive land would
result in absolute net reductions of GHG in the
create leakage if this resulted in increased
atmosphere. If an offset project increases GHG
crop production and accompanying GHG
emissions or decreases GHG removals elsewhere,
emissions elsewhere. These increased
regardless of location or if it was intentional or
GHG emissions could partially or even
accidental, this is known as leakage. Project
completely negate any GHG emission
proponents must be aware of and include all
reductions generated from the original
GHG emissions resulting from their project’s
offset project.
leakage when calculating the GHG reductions,
avoidance or removal enhancements.
Reversals must also be considered and replaced where necessary. Reversals occur when GHG
emissions that have been taken out of the atmosphere (removal enhancement) during the
lifetime of an offset project are released back into the atmosphere, either intentionally or
unintentionally. Risk‐mitigation and contingency plans must be developed to ensure that GHG
reductions achieved by an offset project will endure for a period of at least 100 years.
Additional
Additionality is an important criterion in determining the
eligibility of an offset project. To qualify as eligible, an
offset project must demonstrate that it has reduced,
avoided or removed GHG emissions beyond what would
have occurred in the absence of the offset program (the
PCT). In other words, a project proponent must prove that
the offset project is not simply business as usual, but is
the result of the incentive of having the GHG reductions
recognized as carbon offsets. To determine additionality,
the PCT will use the following tests:
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7
Regulatory test: An offset project must result in GHG reductions beyond existing or
proposed regulatory requirements/industry standards.
Timing test: An offset project must not have started before November 29th, 2007.
Barrier analysis: An offset project must face a technological, financial or other barrier
to implementation that will only be overcome, or partially overcome, as a result of
receiving carbon offsets. For example:
• Financial barrier: An offset project faces a financial barrier if, for example, return
on investment is deemed too low/unacceptable by the project proponent or risk
is deemed too high without the revenue derived from the sale of carbon
offsets. 8 Measures that can be used to evaluate this include internal rate of
return, net present value, payback period, etc.
• Technological barriers: An offset project faces a technical barrier when there is a
lack of equipment or technical expertise to undertake the project and this deficit
can only be overcome with the revenue derived from the sale of carbon offsets
(first‐of‐their‐kind installations often face this barrier).
An offset project faces a financial barrier if, for example, return on investment
(Example A) or risk (Example B) is deemed unacceptable by the project proponent
Example A Example B
Return on Investment
Acceptable
Acceptable
Without
Risk
offsets
offsets
With
Without
offsets
offsets
With
8
Any financial analysis must consider all financial incentives and grants.
8
8
Verifiable
The PCT will only buy carbon offsets from offset projects that have had their project plan
validated and verified by independent third parties with recognized authorization/accreditation.
Validation: The project plan is reviewed to determine if the offset project is capable of
delivering all of the carbon offsets that the project proponent claims. Project plans
that are deemed to have errors, omissions or misrepresentations that are significant
enough to change, or influence the outcome of the validation process will not be
validated.
Verification: The project report and copy of the project’s validated project plan are
reviewed to determine if the offset project has delivered all of the carbon offsets that
the project proponent claimed. Project reports may not be verified if they are deemed
to have significant errors, omissions or misrepresentations, or have made significant
changes as to how the offset project was carried out when compared to the validated
project plan.
Differences Validation Verification
Timing: Occurs before the project developer signs an Occurs after the emission reductions
agreement to supply carbon offsets. have occurred.
Objective: Future oriented: Statements of intent and Past oriented: Statements of
forecasts. performance.
Subject Baselines are accurate and offset project Offset project delivery and emissions
matter: meets the eligibility criteria. data (in accordance with project plan).
Focus: Justification, assumptions, quantification Offset project and data integrity
methodologies. (consistency with project plan).
Frequency: Only once (before the offset project is Periodic (each time carbon offsets are
accepted). delivered).
Clear evidence of ownership
A person or entity must have an established superior right to claim legal or commercial benefits
arising from the offsets project’s GHG reductions. Project proponents will need to resolve any
ownership issues through contractual arrangements that clearly define the rights and
responsibilities of all parties involved in the offset project.
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Counted once Double counting example: Double
GHG reductions can only be counted once. Therefore, counting occurs when the GHG
the PCT will not buy carbon offsets from reduction, reductions from an offset project are
avoidance or removal enhancement projects that: claimed twice. For example: if a
have already sold their GHG reductions in biofuel supplier were to sell carbon
other voluntary or mandated carbon offsets to the PCT earned through
markets, or fossil fuel displacement, consumers
have allowed another entity to use the GHG of the biofuel would be unable to use
reductions when they calculate their own the GHG reductions resulting from
GHG emissions (double counting). the fuel switch when calculating their
own GHG emissions.
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Section 3
Offset project examples
What follows are four examples of potential offset projects. Under each example, two different
scenarios are given. These examples are intended to provide the reader with an introduction to
the criteria/issues on which offset projects will be evaluated by the PCT. They are hypothetical
and as such, no project decisions should be based on their conclusions.
Example 1: Carbon sequestration in trees
Background: Two cattle ranchers have identical ranches in the interior of B.C. Each rancher is
exploring whether he/she will generate carbon offsets by sequestering carbon in the trees on
his/her property.
Scenario: Cattle Ranch A Scenario: Cattle Ranch B
Rancher A has a large stand of trees on Rancher B has a large open area where trees
his/her property that were planted prior are unlikely to grow naturally and there are no
to November 29th, 2007. regulations that require trees to be planted.
Rancher A does not plan to plant any Rancher B commits resources (e.g., money,
additional trees on his/her property. time and/or energy) planting trees for carbon
sequestration in the open area.
Rancher A is unwilling to develop a risk‐ Rancher B develops a risk‐mitigation and
mitigation and contingency plan to ensure contingency plan to ensure that the carbon
that any additional carbon sequestered sequestered in the trees will remain for at
will remain sequestered for at least 100 least 100 years.
years.
Conclusion: This project is unlikely to be Conclusion: This project is more likely to be
eligible to generate carbon offsets. eligible to generate carbon offsets.
Rationale: Rancher A has not engaged in any Rationale: Rancher B has engaged in an activity
activity that is additional to his/her current that is additional to his/her current activity
activity. Simply having trees that are growing (beyond the business‐as‐usual case), and has
on one’s property does NOT make one taken steps to ensure that the carbon will not be
eligible to receive offsets. Not having a risk‐ rereleased into the atmosphere at a later date.
mitigation and contingency plan for any
additional trees planted will also make any
offset projects ineligible.
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Example 2: Methane capture
Background: Two dairy farmers own 300 cows in B.C., and both are considering installing
anaerobic digesters to generate an additional source of revenue from methane capture. Each
farmer is interested in whether he/she will generate carbon offsets.
Scenario: Dairy Farm A Scenario: Dairy Farm B
There are several anaerobic digestion There are no anaerobic digestion
companies in the region, and as such technical companies in the region and as such
expertise is readily available. technical expertise is very limited.
Due to the large size of the project, the Due to the small size of the project, the
anaerobic digester will consistently generate anaerobic digester will generate very
high revenues relative to the amount of capital small revenues relative to the amount of
investment required. The farmer estimates capital investment required. The farmer
that the payback period will be less than two estimates that the payback period will be
years (typical accepted pay‐back periods in this greater than eight years (typical accepted
industry are three to five years). payback periods in this industry are three
to five years).
The local community strongly supports the The local community is strongly opposed
construction of the anaerobic digester, and the to the construction of anaerobic
farmer expects an increase in farm‐gate sales digesters, as residents consider them to
as a result. be dangerous.
Conclusion: This project is unlikely to be eligible Conclusion: This project is more likely to be
to generate carbon offsets. eligible to generate carbon offsets.
Rationale: The investment decision does NOT Rationale: The investment decision appears
appear to face any financial, technological or to face financial, technological and other
other barriers to implementation. In other words, barriers to implementation. In other words,
it appears as though the farmer should take on it appears that the project would not go
this investment even without revenue from ahead without revenue from carbon offsets.
carbon offsets.
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Example 3: Fuel switching from a natural gas to a biomass boiler
Background: Two greenhouse operators in B.C. are considering switching from a natural gas
to a biomass boiler system. They are interested in determining whether this investment can
generate carbon offsets.
Scenario: Greenhouse A Scenario: Greenhouse B
Operator A purchases a biomass boiler, Operator B purchases a biomass boiler,
which is estimated to reduce GHG emissions which is estimated to reduce GHG
by 2,000 tCO2 per year. emissions by 2,000 tCO2 per year.
Operator A decides to cut down a stand of Operator B decides to use wood waste as
trees from a friend’s property to use as feedstock for the biomass boiler. The wood
feedstock for the biomass boiler. The trees waste would have been produced
would not have been cut down without the regardless of the boiler project. The wood
biomass boiler project. The trees are waste is produced by a local mill 20 km
growing on a property 500 km from the from the greenhouse. The wood waste will
greenhouse. The woody biomass will be be transported to the greenhouse using a
transported to the greenhouse using a small large truck making few trips.
truck making multiple trips.
Operator A decides to use natural gas to dry Operator B decides to use wood pellets
the woody biomass in order to make it a that are produced using a carbon neutral
suitable feedstock. energy source. No additional treatment is
required.
Conclusion: This project is unlikely to generate Conclusion: This project is more likely to
carbon offsets. generate carbon offsets.
Rationale: Because Operator A cuts down trees Rationale: There is likely to be negligible
that would not otherwise have been harvested, amounts of GHG emissions released during
the emissions that the trees have sequestered the production and transportation of the
must be taken into account. In addition, the wood pellets. The project’s emission
emissions from transporting the woody reductions are likely to be greater than the
biomass over such a long distance and from the emissions from production and transportation
use of natural gas to dry the biomass must also sources. Therefore, carbon offsets would
be taken into account. The emissions from likely be generated.
these sources may be greater than the project’s
emission reductions. If this is the case, then no
carbon offsets will be generated.
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Example 4: Food Processor Energy Switching
Background: Two food processors in B.C. that use large amounts of heat are exploring
whether they are capable of generating carbon offsets by switching from a natural gas heating
system to a geothermal heating system.
Scenario: Food Processor A Scenario: Food Processor B
Food Processor A purchased and Food Processor B purchased and successfully
successfully installed a geothermal heating installed a geothermal heating system in
system in June, 2004. June, 2008.
Food Processor A received provincial Food Processor B received provincial funding
funding that explicitly stated that all GHG that did NOT explicitly mention ownership of
emission reductions resulting from the the GHG emission reductions in the funding
geothermal project become the property of conditions.
the provincial government.
Conclusion: This project is unlikely to be Conclusion: This project is more likely to be
eligible to generate carbon offsets. eligible to generate carbon offsets.
Rationale: To be eligible to sell carbon offsets Rationale: To be eligible to sell carbon offsets
to the PCT, all projects must have been to the PCT, all projects must have been
initiated after November 29th, 2007. initiated after November 29th, 2007.
Consequently, Food Processer A, who initiated Consequently, Food Processer B, who initiated
the project three years prior to this date, the project after this date, would be eligible to
would be ineligible to sell carbon offsets. In sell offsets. In addition, because Food
addition, because Food Processor A’s funding Processor B’s funding did not explicitly state
explicitly stated that the funding agent would that ownership of any carbon offsets would go
have ownership of any carbon offsets to the funding agent, he/she is still eligible to
generated, he/she is ineligible to claim any claim ownership of any carbon offsets.
carbon offsets. The purpose of this condition is
to prevent two parties claiming ownership for
the same offset (also known as “double
counting”).
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