The increasing pressure on organizations and individuals to take action to slow the effects of climate change, together with the growing carbon market in the U.S., can present new opportunities for dairy farmers. The generation of electricity and carbon offsets from projects that reduce greenhouse gas emissions (GHG) can provide additional revenue and reduce farm operating costs.

However, despite awareness within the agricultural community regarding such opportunities, there is much confusion over what projects can generate carbon offsets, what the guidelines are and how they can be sold on the carbon market. Background Agriculture alone accounts for 7 percent of the total U.S. GHG emissions, the majority of which comes from soil management techniques such as the application of fertilizers, and from keeping and rearing livestock, particularly dairy cattle, hog farms and beef production.

Reducing the emission of heat-trapping gases into the atmosphere can make a significant environmental impact, while also providing additional benefits for farmers from the production of electricity and carbon offsets – called carbon credits. Climate change is a key issue being discussed at the highest levels in the U.S. and internationally, as world leaders decide how best to work towards lowering the amount of GHGs we release into the atmosphere. Many countries have already implemented emission restrictions on a national or regional level, and many more are likely to do so in the near future.

The carbon market and carbon offsetting Climate change is a global problem, and, as such, measures to reduce greenhouse gas emissions are viewed on a worldwide scale. This means that regardless of where, geographically, reductions are made, the overall amount of emissions will be reduced. This is the theory underlying both regulatory and voluntary carbon markets. Regulatory cap-and-trade carbon markets operate in countries which have implemented government-mandated caps on the amount of greenhouse gas emissions that businesses can emit.

Ideally, businesses should work to reduce their emissions at source, but this can be a time-consuming, difficult and expensive process. Therefore, in the meantime, organizations are permitted to offset their emissions, by reducing emissions elsewhere, often in developing countries where it is easier, quicker and more economically viable to do so. The Kyoto Protocol states that industrialized countries must reduce emissions to 5.2 percent below 1990 levels by 2012 and was signed by 169 countries, although not by the U.S. Emission reductions can be undertaken individually or jointly with other countries through ‘flexibility mechanisms’ such as the Clean Development Mechanism (CDM).

The CDM allows for trading of emission reduction credits between industrialized and developing countries, and strict standards are in place to ensure projects meet quality guidelines. Although there is no federal regulation in place in the U.S., several states have implemented GHG emission restrictions and limits, paving the way for a national climate policy. In the U.S. there is a growing demand from voluntary buyers for carbon offsets. Voluntary markets are those in which organizations choose to reduce their carbon footprints without being required to do so by law.

Businesses may choose to do this as part of their corporate social responsibility strategy, or as a pre-compliance strategy in preparation for future carbon restrictions that may be applied to their industry. People also partake in the voluntary market when they choose to offset their individual emissions, in particular those emitted by driving or flying, by purchasing carbon offsets. Carbon offsets generated by U.S. farmers can only be sold on the voluntary market at present. Generation of carbon offsets Carbon offsets are generated by GHG emission reduction projects.

Although the regulatory market has a strict verification system in place to ensure projects meet specific criteria, the voluntary market is self-regulated at present, and no single verification system has yet been adopted by the industry. However, for projects to qualify as generating good-quality carbon offsets they must represent real reductions in emissions that are measurable, verified by an independent third party and additional to any reductions that would have occurred in the absence of the project.

Carbon offset projects include: anaerobic digestion projects, no-till farming, reforestation, renewable energy projects and landfill methane capture. Anaerobic digestion projects for dairy farms Anaerobic digestion projects, which capture the methane that is released from waste lagoons during the decomposition of manure, are a tried and tested way for dairy farmers to reduce GHG emissions. Methane is 21 times more potent as a GHG than carbon dioxide and therefore, even more harmful to the environment.

Anaerobic digestion projects that capture methane may be suitable for the generation of carbon offsets as the revenue from the offsets are often crucial for the viability of the project. The sale of these carbon offsets, as well as the revenue savings from energy generation, help to finance the initial cost of the project. Carbon offsets continue to be generated for the lifetime of the project, and can be a valuable revenue stream. The captured methane can also be used to provide energy for use at the farm, with excess being sold to utilities.

This can also generate carbon offsets because ‘clean energy’ is used to replace energy derived by traditional GHG-emitting sources. Anaerobic digesters have been used successfully at farms of all sizes, but projects that are more likely to be financially viable and that will generate a significant amount of carbon offsets are those that meet the following criteria:
• Farms that have an existing manure lagoon greater than a meter in depth
• Manure lagoons that are between 59ºF and 104ºF (15ºC and 40ºC) as seasonal variations will impact the volume of carbon credits
• Farms with at least 2,000 cows
• Farms with a daily flushing system
• High on-site electricity consumption
• Access to land for biodigester construction

Farmers with operations that meet these criteria are strongly urged to consider installing an anaerobic digester and consult with a carbon specialist to ensure the project will meet the criteria for the production of carbon offsets and to discuss other ways in which their farm can reduce its overall GHG footprint.

U.S. dairy farmers are in an ideal position to help the environment while taking advantage of the opportunities presented by the carbon market. Visit www.ecosecurities.com for more information.