Alberta: N Amer 1st compliance offset C market

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ALBERTA NORTH AMERICAS FIRST COMPLIANCE OFFSET
CARBON MARKET
Tom Goddard, Alberta Agriculture and Food Karen
Haugen-Kozyra, Climate Change Central Andy Ridge,
Alberta Environment
Carbon Consultation, October, 2008
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Outline

• Context
• Regulatory Framework
• Offset System Tillage offset
• First Compliance Period
• Conclusions

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Albertas GHG Emissions in the Canadian
Context(MT CO2e/ yr)
305
223
0.4
0.5
88
1.6
2
66
87
24
62
168
21
85
91
207
2004
2
6
48
9
2
20
2020
25
22
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Alberta Approach

• Long term issue
• Need to start with practical, achievable
  objectives
• Policy certainty for industry
• Large investments being made now expensive to
  retrofit, investment is for 40 years
• Implementation of new technology will be a big
  part of the long-term solution.
• Linked to our unique role as North Americas
  energy supplier
• Market instruments - bridge gap between current
  emissions and long-term solutions.
• All Albertans must be part of the solution
• Requires strategic and focused investment in
  transformational changes (technology, behavioral)
• Remain globally competitive

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Where have we come from?

• Taking Action on Climate Change 2002
• Provincial 50 GHG intensity/GDP target by 2020
• Seven thrusts, including
• Government Leadership
• Energy Conservation
• Carbon Management/ Technology and Innovation
• Renewable and Alternative Energy
• Enhancing Carbon Sinks
• Adaptation
• Climate Change and Emissions Management Act
• GHG regulations on
• Mandatory reporting of GHGs by industry - 2003
• Intensity targets for large facilities - 2007

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Specified Gas Emitters Regulation

• Applies to all facilities in Alberta that produce
  over 100,000 tonnes of CO2e
• Facilities have been reporting since 2003
• 103 existing and new facilities as of 2006
• Develop facility baselines
• Based on average emissions intensity from 2003-05
  (emissions/productionbaseline intensity)
• Reduction targets off of baseline (-12)

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Large Industrial Emitters Profile
(gt100,000 tonnes CO2e/year)
Alberta Reporting Program - 2006
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Options to Achieve Targets

• Emission Performance Credits
• These are credits for better than target
  performance
• Fund Credits
• Invest in the Climate Change and Emissions
  Management Fund at 15/tonne funds used to
  develop or invest in Alberta based technologies,
  programs, and other priority areas (as per CCEMA)
• Emission Offsets
• Voluntary emission reduction opportunities in
  support of achieving environmental objectives

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Alberta Offsets
Afforestation Beef feeding Beef life
cycle Biofuel Biogas Biomass Energy
Efficiency Pork Tillage
Compost Enhanced Oil Recovery (2) Landfill
Gas Waste Heat Recovery (2)
Supported by Documentation Calculators Guidanc
e docs
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Protocols Under Consideration

• Nitrogen Use Efficiency
• Wetlands Management
• Conversion to Perennial Forages
• Reducing Summerfallow
• Residue Management
• Rangeland
• Beef - Residual Feed Intake
• Pasture Management
• Soil Amendment

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Offset Criteria

• Emission Offsets
• Action (project) taken on/after January 1, 2002
• All actions must occur in Alberta
• Must be real, quantifiable and measurable
• Not otherwise required by law clearly owned
• Not double counted (Unique)
• Must be verified by 3rd party
• Tools and Standards
• Protocols most comprehensive set in NA
• 23 Protocols now approved 4 more in protocol
  review process
• 12 more under development for this year
• Project-based Registry launched
• Guidance Documents Projects, Verification,
  Protocols (draft)

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Offset System Design

• Protocols
• Developed on ISO 14064 Part 2 framework
• Considered scientific and technical review
• Basis for linking and building when other markets
  are developed
• Verification Happens After Credit is created
• Need strong government approved protocols
• Validation and Registration optional
• Business Risk management tool
• Registry

Supporting doc Offset Credit Project Guidance
Document
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Protocol development/validation
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Challenges of Delivering Agriculture-Based
Offsets to Market

• Developing Science
• Transaction Costs and Risks
• Small amounts from each farm
• Need to be Grouped or Aggregated
• Verification Costs
• Need a low-cost verification system
• Producers will need
• Contractual project and market advice

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Carbon Trading 101
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Alberta Offset System

• Can sell credits back to 2002 and as far into the
  future as you are willing to contract
• Can contract 1 or more years, part or all of your
  acres, and part or all of tonnes per acre allowed
  through the AB government protocol
• No deadline to sign up ? you will not lose your
  carbon credits if you wait

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Key Regulatory Issues

• Addressing Additionality
• Actions have to be new after 2002
• Not allowing anyway tonnes
• Addressing the non-permanent nature of Soil
  Organic Carbon (reversals of CO2e)

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Alberta Ensuring Additionality
Adjusted Baseline -only New C going forward
CO2e
NT
RT
1990
1999
2000
2002
2001
Time ?
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Permanence - Alberta

• Government backs the liability
• Assurance Factor
• Based on expert opinion
• Frequency of reversal of tillage practices in Dry
  Prairie and Parkland
• Reversal risk shaves off C for every tonne
  created into virtual Reserve pool
• Backs the liability of a reversal of Soil C
• No credits earned for that year (no liability on
  farmer/project developer)

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Alberta Government Protocol
Figure A1. The boundary between Dry Prairie and
Parkland is the Black-Dark Brown soil zone
boundary. The east-central and east is the
boundary is that between the Atlantic Maritime
and Mixed Wood Plains ecozones. From McConkey
2006.
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Initial transactions(July-Dec, 2007)

• 25 of liabilities were settled with offsets.
• Tillage protocol was favourite
• 7 Projects 3 Tillage, 2 Wind, 1 LFG, 1 Biomass
• 6 to 12 / tonne
• 30-40 transaction costs

Note Demand approx 10 to 12 Mt per year
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Alberta Offset System Experience

• proved the aggregator model works.
• interest in biosequestration projects the model
  works.
• is now competing on reduced transaction costs.
• More project documentation templates are
  required.
• Verification standards are needed for more
  complex projects (e.g. tillage).
• Ownership issues barred additional tillage
  offsets.
• Accreditation of verifiers may be warranted.
• Unanticipated costs found on the project
  developer side will lead to more diversification
  of projects (15 safety valve a challenge).

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www.CarbonOffsetSolutions.ca Climate Change
Central Website

• Market Standards (ongoing) (protocols)
• Market Intelligence
• Market Registry (Meeting Place)
• How to Guides
• List of aggregators, verifiers, buyers
• Sample Contracts (seller- buyer seller-verifer)

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Summary

• Alberta the first jurisdiction in North America
  to create a multi-sector regulatory-based demand
  for carbon reductions
• Provincial system focused on technology
  development and new market opportunities
• First stages of a carbon market
• New carbon investment opportunities
• Credit creation opportunities exist
• Back to 2002 no deadline to sell
• Need to consider the 15/tonne limit
• Variety of offset projects eligible
• A voluntary component of an environmental
  regulatory policy framework
• Tools to support market activity

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Quantification Principles

• Completeness Include all relevant GHG emissions
  and removals. Include all relevant information
  needed in order to issue valid offset credits
• Consistency Ensure the methodologies for
  comparable projects yield similar net
  reductions/removals and ensure consistency among
  the elements of a Project Document
• Accuracy Reduce bias and uncertainties as far
  as practical
• Transparency Disclose sufficient and
  appropriate GHG-related information to allow the
  Program Authority and verifiers to make decisions
  with reasonable confidence
• Relevance Select GHG sources, GHG sinks, GHG
  reservoirs, data and methodologies appropriate to
  the needs of the intended user.

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Information

• Climate Change Central
• http//www.carbonoffsetsolutions.ca
• Alberta Government
• http//www3.gov.ab.ca/env/climate/index.html

Tom.Goddard_at_gov.ab.ca KarenHK_at_climatechangecentral
.com Andy.Ridge_at_gov.ab.ca