In today’s uncertain economy, business owners from all walks of life are looking for opportunities to create new income streams, cash flow and decrease potential liabilities. Farmers are in a unique position to use carbon credits as a means of achieving all three goals.
How? As described in a previous Ag Nutrient Management article (Issue 1 2009, pg. 10-11), the agricultural community can be a large supply-side contributor to a cap-and-trade system by their ability to infuse tradable credits into growing carbon markets. Farms have readily available technologies which allow them to quickly reduce their own greenhouse gas emissions. Once verified, those reductions can translate into carbon credits – the monetized financial instrument of the carbon marketplace. Large emitters who cannot reduce their own emissions as effectively have the option of purchasing the carbon credits supplied by agricultural projects. The global environment does not care if the greenhouse gas emission was reduced at a farm in Ohio or a power plant in New Jersey – only that the emission occurred. In this scenario, the overall emission reduction goal (or cap) is met while the farm decreased its environmental liabilities and increased its revenue. Profitability and environmental stewardship no longer have to compete; they can create a healthy bottom line together.
What factors determine if your farm can create carbon credits?
The financial incentive of carbon credits is awarded to those who go above and beyond their standard industry practices or regulations. The concept of “business-as-usual” is very important to the carbon world. If there are governmental regulations in place dictating an activity or if everyone in the industry is using a common practice, then the impact of the emission reduction on the atmosphere is already presumed and no additional incentive is awarded. A farm applying for carbon credits through one of the registries (Chicago Climate Exchange [CCX] and California Climate Action Registry [CCAR] are two examples) will have to establish that the practice(s) employed to reach the stated emission reduction were not “business-as-usual” and that the farm’s baseline against which they’re measuring their reduction can be verified by a third party. Each registry may have its own particular method for calculating baseline emissions, but the concept is required by all.
What is a baseline?
This very important term is defined as the “business-as-usual” emissions scenario that a project activity (or reduction) is measured against to quantify carbon offset credits. In order to state that a reduction occurs, you must first establish – in a measurable way – the amount of your expected overall greenhouse gas emissions if you had continued to practice “business-as-usual.” This starting point, usually stated as a carbon dioxide equivalent, is called the baseline. The difference between your beginning number, or baseline, and the amount of your reduction, is where the potential for carbon credits occur. An example using generic numbers and units: If your baseline equals 1,000 units of GHG emissions and your newly implemented project (that is beyond “business-as-usual”) reduces your overall emissions to 800 units, then the potential available carbon credits would be calculated on the net emission reduction of 200 units.
What is the ideal operation set-up for carbon credits based on methane capture protocols?
Here are the first two questions that must be answered: “Is my farm releasing methane into the atmosphere, and can I establish a baseline to quantify that emission?” Methane emissions tend to be generated from storage practices surrounding the liquid portion of the manure. Regions of the U.S. using drylot practices or those that have low retention times between field applications might not be producing enough of a quantifiable methane emission with their current manure management to warrant engaging methane emission reduction practices. If you can answer “yes” to the first question, the next step is dependent entirely on your operation. The specific requirements for methane protocols may differ between the various registries in the U.S. carbon marketplace, but the personal farm evaluation process will be the same.
The protocols for methane capture will expect you to capture and destroy some or all of the methane emitted from your current operation using anaerobic digestion with gas collection.
The EPA and the USDA recognize three primary anaerobic digester technologies for manure: plug flow, mix digestion and covered digestion. Once captured, the methane will need to be destroyed in a flare, combusted in an engine or put to some other beneficial use, which can be measurably verified that the destruction occurred. Some farms have used the methane to run key farm equipment or scrubbed it and put into a natural gas pipeline. Operational aspects that your farm must consider boil down to two key ideas – bedding used and manure management practices. Do you use sand, sawdust, straw or recovered solids? Do you flush, scrape or vacuum? Your response to each of these will help determine which of the three approved capture methods would make the most sense for you to implement your new project to capture greenhouse emissions. The fixed costs associated with greenhouse reduction projects will depend entirely upon the technology used.
When we evaluate farms for potential carbon credit projects, we look for technologies and operational set-ups that can most easily integrate into a farm’s current operation, ideally with only minimal changes to farm infrastructure and operation. Farms which currently use manure lagoons as part of their storage often have a long manure retention time – which means significant methane emissions in their “baseline” situation and a good opportunity for reductions with an anaerobic digestion and gas capture project. One option for methane capture is placing a cover over the existing lagoon and then using a monitoring/data collection system and a method of destroying the captured methane (simple: flare; complex: electrical generation system). Since it is not considered ‘business as usual’ to capture and destroy the methane currently escaping into the atmosphere from an open lagoon, by doing so, the overall greenhouse gas emissions from the farm are reduced and the opportunity for carbon credits has been created – carbon credits that can help generate a better bottom line for both your farm and the earth. ANM
In the May edition of Ag Nutrient Management, Dr. Subler will be continuing this look into the carbon markets. That article will focus on answers to the following questions: Will your operation benefit from this market? What does it take to get involved? What might be the future of this market?
Dr. Scott Subler
President, Environmental Credit Corp
