Iowa Farm Bureau Carbon Credit Aggregation

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Iowa Farm BureauCarbon Credit Aggregation
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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

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Carbon Jargon

• Carbon Pool
• Stock
• Carbon Flow
• Sequestration
• Sources
• Sinks

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Surface Carbon

• Only 40 x 1018 grams of carbon are present at
  the Earths surface.
• Of this "mobile" carbon, the major pool occurs in
  inorganic substances (largely bicarbonate)
  dissolved in seawater
• Each of the other active reservoirs contains
  approximately 1 x 1018 grams C.
• Agricultural ecosystems represent about 11 of
  the earths land surface and include many of the
  most productive and carbon-rich soils.

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Carbon Storage

• Carbon is continuously cycled between land and
  sea, in inorganic and organic form.
• Most of the carbon stored in organic matter is
  nonliving, occurring either in soil humus or
  dissolved organic carbon (DOC) in seawater.
• The atmosphere, in addition to comprising a major
  carbon reservoir, plays a critical role as a
  medium for rapid global exchange of CO2 and other
  bioactive elements.

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Modeling Carbon in the Soil
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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.

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What is carbon sequestration?

• Transformation of atmospheric carbon to a
  fixed-state carbon.
• Trees
• Soil Organic Matter (SOM)
• Underground traps
• Carbonate rock
• Dissolved Carbon (in seawater)

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The Carbon Cycle
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Crop Biomass

• Contribute to potential soil carbon source
• Protects the soil surface from extreme conditions
  (temperature moisture) to allow microbial
  activity to function optimally.
• Undisturbed biomass on soil surface prevents
  rapid decomposition.

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Loss of Soil Carbon

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

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Increasing Carbon Pools

• Soil Pool
• Increase organic matter inputs, roots, litter
• Reduce cultivation, aeration
• Improve crop yields
• Improve water management
• Improved carbon management in agricultural soils
  improves soil quality.

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Value of Increasing SOM

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

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What is carbon sequestration?

• Transformation of atmospheric carbon to a
  fixed-state carbon. Land-based carbon
  sequestration is typically done through
• Forestry
• Increased Soil Organic Matter (SOM)
• Reduced tillage
• Grass plantings

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Soil Carbon Sequestration

• 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 between 40 and
  70 g C m-2 per year (.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 661930-1946
  (2002) Tristram O. West and Wilfred M. Post

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Carbon changes
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Soil Carbon Sequestration

• Carbon sequestration rates, with a change from
  conventional tillage to no-till, can be expected
  to peak in 5-10 yr with SOC reaching a new
  equilibrium in 15-20 yr.
• Following initiation of an enhancement in
  rotation complexity, SOC may reach a new
  equilibrium in approximately 40-60 yr.

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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

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Carbon Storage Potential in Iowa
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The Chicago Climate Exchange

• 4-year Pilot Project
• 2003 - 2006

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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 phase 1 of the pilot program.

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CCX Founding Members
American Electric Power Ford Motor Company Baxter
DuPont Waste Management Inc. Equity
Office Properties International Paper

• Manitoba Hydro
• MeadWestvaco
• Motorola
• STMicroelectronics
• Stora Enso
• Temple-Inland
• City of Chicago

• Many more entities have joined the CCX, with new
  members joining almost daily.

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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.

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Goals of the Exchange

• demonstrate that a cross-section of North
  American entities can reach agreement on a
  voluntary commitment to reduce Greenhouse Gas
  emissions and implement a market-based emission
  reduction program
• establish proof of concept by demonstrating the
  viability of a multi-sector and multi-national
  Greenhouse Gas emissions cap-and-trade program
  supplemented by Project-based emission offsets
• establish a mechanism for achieving price
  discovery as well as developing and disseminating
  market information
• facilitate trading with low transaction costs

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Goals of the Exchange

• allow flexibility in the methods, location and
  timing of emission reductions so that Greenhouse
  Gas emissions can be reduced cost-effectively
• build market institutions and infrastructure and
  develop human capital in Greenhouse Gas emissions
  trading
• encourage improved emissions management
  harmonize and integrate with other international
  or sovereign trading regimes and,
• develop a market architecture that rewards
  innovative technology and management and
  encourages sustainable farming and forestry
  practices.

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Greenhouse Effect

• The greenhouse effect refers to the temperature
  regulation effect that certain atmospheric gases
  have on the earth.
• The temperature-regulating gases, called
  greenhouse gases or GHGs, form a blanket around
  the earth that traps some heat from the sun
  within the earths atmosphere, keeping the planet
  warm and habitable.

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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)

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Successful Trading Models

• The first major environmental success of the
  emissions trading concept was demonstrated in the
  1980's U.S. program to phase out lead from motor
  fuel.
• This was followed by the highly successful U.S.
  Environmental Protection Agency sulfur dioxide
  (SO2) emissions trading program, which continues
  to prove the concept on a large scale.
• To reduce acid rain, an overall cap on SO2
  emissions was imposed on electic power plants.
  Power generators that find it expensive to cut
  sulfur emissions can buy allowances from those
  that make extraordinary cuts at low cost.
• While the first compliance year was 1995, trading
  started several years earlier. The first EPA
  auction was administered by the Chicago Board of
  Trade in 1993. Through private transactions and
  annual auctions, electric power generators trade
  emission allowances to arrive at an efficient use
  of mitigation resources.

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Sulfur Dioxide

• The SO2 program has been extremely successful
  emissions were reduced faster than required and
  costs are far below most forecasts.
• There has also been steady growth in the trading
  of allowances, from 700,000 tons of registered
  trades in 1995 to approximately 12 million tons
  in 2001.
• The market has now reached a value of
  approximately 2 billion each year for registered
  trades.

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CCX Reduction Timetable

• 2003-2006 Reduce emissions to 1, 2, 3, 4
  below 1998-2001 baseline

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Farm Bureau Aggregation

• Aggregating 3 types of Credits
• Exchange Soil Offsets (XSOs)
• Exchange Methane Offsets (XMOs)
• Exchange Forestry Offsets (XFOs)

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XSO Eligible Land

• Land must be in the eligible pilot 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
• Crop land that was recently converted to
  permanent grass (after Jan 1, 1999)

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XSO Eligible Grass Land

• For this enrollment, old grass is not eligible.
  
• Cropland that is in harvested hay as part of a
  crop rotation is eligible as no-till.
• Eligible grass lands must be croppable lands that
  were planted to grass after Jan 1, 1999.

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UU.S. Central Region for CCX Soil Offsetssets
Offsets for no-till or grassesOffsets for
grasses only
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Exchange Soil Offsets (XSOs)

• Commitment to 5 years of conservation tillage
• Annual certification of compliance
• Credits transferred to FB on Jan 1
• 20 reserve held until end of pilot project
• Transfer price will be the price as determined by
  sale through CCX less a 10 service fee.

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Documentation For CCX Ag sector offsets

• Enrollment form information
• legal description of acreage, practice(s)
  employed
• FSA maps and 2005 crop report
• lessees 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

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Definition of Conservation Tillage

• For CCX purposes these practices are as defined
  in the Natural Resources Conservation Service
  National Handbook of Conservation Practices.
• No-till/Strip-till - Managing the amount,
  orientation, and distribution of crop and other
  plant residue on the surface year-round while
  growing crops in narrow slots or tilled or
  residue-free strips in soil previously untilled
  by full width inversion implements
• Ridge-till - Managing the amount, orientation,
  and distribution of crop and other plant residue
  on the soil surface year-round while growing
  crops on preformed ridges alternated with furrows
  protected by crop residue.

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Tillage Equipment

• Full width inversion
• Moldboard plow
• Chisel plow
• Field cultivator
• Tandem disk
• Offset disk
• Row crop cultivator

• Okay to use
• No-till/ridge-till planter
• No-till drill
• Rolling harrow
• Subsoiler/ripper
• Anhydrous applicator
• Manure knife applicator

• 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.

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Mechanics of Ag Offset Aggregation in CCX

• CCX
• issues offsets to aggregators 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 4-year contract sign annual attestations
allow access to CCX verifiers ultimate owner of
offsets
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XSO Enrollment Application
Farm Bureau Management Corp.
Contract No.__________________ 5400
University Ave West Des Moines, Iowa 50266
APPLICATION FOR PARTICIPATION IN 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 Iowa Farm Bureau that registers Exchange
Soil Offsets (XSOs) with the Chicago Climate
Exchange (CCX) for the years 2006-2010 on
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 on the Exchange Soil Offset Enrollment
  Worksheet
• Please complete and attach the Exchange Soil
  Offset Enrollment Worksheet

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XSO Enrollment Form Contd

• XSOs accrue at the rate of 0.5 XSO per acre per
  year for eligible minimum till/No-till.
• XSOs accrue at the rate of 0.75 XSO per acre per
  year for permanent grass cover.
• 20 of the accrued XSOs shall be held in reserve
  by the Purchaser until Dec 31, 2006.
• 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.
  

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Terms Conditions

• The enrolled project meets all applicable
  eligibility rules of the Chicago Climate
  Exchange.
• CCX will issue to the CCX Registry account of the
  project owner or its designated aggregator a
  quantity of Exchange Offsets that conforms to the
  applicable CCX Rules.
• Each sale of Exchange Offsets executed through
  the Chicago Climate Exchange shall represent a
  complete transfer of all legal rights associated
  with the mitigation of greenhouse gases that
  relate to the quantity and time periods
  associated with the Exchange Offsets that are
  established through fulfillment of the Terms of
  this contract.
• The project owner or its CCX-registered
  aggregator may sell or retain the Exchange
  Offsets earned under the provisions of this
  agreement.
• The project owner shall retain full legal
  ownership of all greenhouse gas mitigation rights
  that may accrue (a) on lands or via activities
  not included in the CCX-registered project (b)
  in excess of the quantity of Exchange Offsets
  issued by CCX to CCX-registered projects (c)
  before or after the years 2003 through 2006 for
  the CCX- registered project.

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Terms Conditions

• CCX makes no warranty as to the marketability or
  market value of CCX Exchange Offsets.
• Each project owner, and, when applicable, its
  aggregator, is required to periodically submit a
  signed project report that confirms conformance
  with the terms herein. Representatives of CCX
  may conduct on-site inspection of registered
  projects and related documents. Each project
  owner agrees to provide access in such cases in a
  prompt and cooperative manner. All CCX offsets
  projects and project reports and verification
  reports are subject to inspection and audit by
  the provider of regulatory services designated by
  CCX and by other independent experts as may be
  engaged by CCX.
• CCX may request additional information and/or
  access to registered projects for the purpose of
  advancing understanding of greenhouse gas
  mitigation projects. Project owners may decline
  such access without penalty. In no cases shall
  research findings cause a reduction in the
  quantity of Exchange Offsets to be issued to a
  registered project.
• Failure to conform to the rules provided herein
  may result in termination of enrollment in CCX
  and prohibition from all further participation in
  CCX.

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XSO Enrollment Worksheet
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Enrollment Forms

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

• http//www.iowafarmbureau.com/special/carbon/defau
  lt.aspx

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Enrollment Summary

• Complete Enrollment contract
• Complete Enrollment worksheet
• Obtain copies of FSA maps, 2005 acreage report
  (CCC578)
• Mail materials to Iowa Farm Bureau.

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IFBF/CCX Database
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Enrollment/Parcel Report
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Certification Report
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Contact Information

• David Miller
• Director, Commodity Services
• Iowa Farm Bureau
• 5400 University Ave
• West Des Moines, IA 50266
• Ph 515-225-5430
• E-mail damiller_at_ifbf.org

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• Thank You
• Would you like to enroll?